A crunchy week for chipmakers

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Amazon's capital expenditure plans are giving investors the jitters, and then the rest of the show is all that and a bag of chips. We'll take a look at America's snacking industry and why semiconductor chipmakers had such a bad week. I'm Mark Fred. Filipino and here's the news you need to start your day.

Investors were not happy with Amazon. The company shares fell as much as double digits in after hours trading yesterday. The sell-off happened after Amazon announced plans to spend$200 billion on capital expenditure this year. That's roughly a third more than what Wall Street was expecting, and it comes as the tech giant increases its bet on artificial intelligence.

Amazon CEO Andy Jassy told investors the spending was justified for two reasons. One, there's strong demand for existing services, and two, the company has plans to expand products like its Leo Satellite Internet Network. But just to put it into context, Amazon's funding commitment is way more than what its rivals like Google and Microsoft are spending.

US tech stocks have fallen for three days in a row now. The Nasdaq composite is on track for its worst week since November. Software stocks and chipmakers have been hit particularly hard over the past few days, so today we're gonna hone in on how chipmakers are faring. Just a quick recap, in addition to getting caught up in the wider sell-off, ARM, AMD, and Qualcomm put out some disappointing earnings results.

And the FT reported that sales of NVIDIA's H two hundred AI chips to China are still awaiting final approval from Washington. Here to tell us more is the FT's Michael Acton in San Francisco. Hi, Michael. Hi, Mark. Okay, so I just threw a lot out there. Let's start with NVIDIA and these H200 chips. So in December there was this huge breakthrough. The NVIDIA CEO Jensen Huang had sort of intensively lobbied the White House to turn around its stance on export controls on these chips.

this deal basically opened the door to NVIDIA selling these chips to China. But the problem is that the implementation of that deal's really been caught up in the details of Washington bureaucracy and national security apparatus, so We know that Chinese customers are yet to place orders with NVIDIA because they're waiting for the licenses from the US side.

And the US side has very strict requirements, primarily through the uh State Department, which are really holding up this key market from being opened for NVIDIA. And you know, just to cover our bases, NVIDIA, AMD, and the State Department declined to comment. Now, uh moving on to how NVIDIA in particular is doing, its stock has dropped fifteen percent since the end of October. It's had a really rough week. Are we seeing a change in the fortunes for NVIDIA?

So I think it's important to have some perspective on this. I mean, it was almost exactly a year ago that we saw Deep Seek wipe about six hundred billion dollars off of NVIDIA's market cap. The Chinese AI company had a breakthrough with these reasoning models, and everyone thought that that meant some sort of drop in demand for NVIDIA's most powerful chips. But then later in the year, NVIDIA

at least briefly surpassed the five trillion dollar market capitalization. There's also the fact that NVIDIA seems to have a clear run at about half a trillion dollars in in revenue for twenty twenty six. So the fundamentals aren't uh super worrying. What is interesting is how relatively small pieces of news at this point can cascade into these really bad news from video

shares. So in this case it was how the week started for NVIDIA with Jensen Huang defending against reports that he was falling out with OpenAI, with whom they had this huge hundred billion dollar uh infrastructure deal that was announced in September. But really anything that suggests to investors that this critical partnership

at the heart of the AI boom could be in trouble is enough to wipe some serious value off these companies. Let's talk about some of these other chip companies now, ARM, AMD, and Qualcomm. How did investors react to their earnings reports this week? So what's interesting is none of them completely flubbed their results, but in normal times you probably wouldn't see the reaction that we got. But we're not in normal times.

So Nasdaq is down this week on anthropic releasing new tools, which led to this kind of wave of speculation about whether AI is really posing an existential risk to IT and software companies. And then Most profoundly, I think, is this memory shortage we're seeing across the chip market, because all of these memory chip suppliers have pivoted to try and produce

the most advanced HBM memory for the AI data centers that we're seeing this huge multi billion dollar build out for. And as a result, It's having a knock on effect. on the consumer electronics. So there's a lot of anxiety about how long that shortage is gonna go on for. The Intel CEO said it could go on until twenty twenty eight, and as long as there's a constraint on traditional consumer electronics, then companies like AMD and Qualcomm and ARM are going to see hits to their shares.

Michael Acton covers the semiconductor space for the FT in San Francisco. Thanks, Michael. Thanks, Mark.

Yesterday, UK Prime Minister Keir Starmer apologized to the victims of Jeffrey Epstein. I am sorry. Sorry for what was done to you. Sorry that so many people with power failed you. Sorry for having believed Mandelson's lies and appointed him. Peter Mandelson was Starmer's pick as Britain's ambassador to the US. Mandelson quit the House of Lords earlier this week. It came after emails released by the US Department of Justice showed he passed along confidential government information to Epstein.

Starmer admitted that he knew about Mandelson's relationship with Epstein when he appointed him, but Starmer said Mandelson lied about the extent of that relationship. Now the Prime Minister is facing calls to resign. Both the pound and Gilt came under pressure yesterday. Investors are worried about the potential for a more left wing government to increase public borrowing. For what it's worth though, Starmer insists that he will stay at his post.

Get your game face on. This Sunday, Super Bowl 60 kicks off with a matchup between the Seattle Seahawks and the New England Patriots. It's prime time for sports fans, but the big game is also synonymous with snacks. I'm partial to some chips and dips. This year, though, the state of the economy might be curbing America's appetite and slimming down the snacks table. Here to talk about that is Greg Meyer. He's the FT's U.S. Consumer Editor. Hi, Greg.

Hey Mark. So uh we got a little preview of how some of America's biggest consumer brands are gearing up for the Super Bowl when they reported earnings this week. Let's start with Pepsi. Talk me through what they said. Pepsi is is obviously one of the biggest soft drinks and snacks companies on earth. They reported their quarterly results on Tuesday.

Their sales grew overall year on year, but they noted volumes in their so called convenient foods categories, snacks um declined by two percent. This has been a persistent problem for their um snacks business, which sells Doritos, Cheetos, Tostitos. Anything that crunches. But yes, things that crunch consumers are putting their foot down and and buying less, which is why why you're seeing these lower volumes.

In response, Pepsi said very explicitly they're gonna cut prices in the US for an assortment of snack foods, including Doritos and Cheetos. by up to fifteen percent. Starting this week before the Super Bowl kicks off. I'm sure coincidental timing. Now you said that consumers are putting their foot down because the prices are getting too high, but the way that I understand it is that it's not all consumers, people who can't afford snacks as much.

are buying less while people who can afford are still buying at the same level or or more. Aaron Powell That's right. Some of the the trends you're seeing in other sectors of the economy, you're clearly seeing in food. For wealthier households, they're generally Still spending and certainly not gonna be cutting back on things like a bag of chips.

But as uh Ramon LaGuarda, Pepsi's chief executive, said on their earnings call this week, low and middle income households have become stretched and have concerns over affordability. Um Mondeleese International, which sells Oreo cookies and Ritz crackers and chocolates. They also reported earnings and their CEO, Dirk Von Deput, made some similar comments. the consumer confidence is is near a historic low. They're worried about overall affordability, they are fed up with the price increases.

So what we are seeing is that the average shopping basket, whether you're in the higher or in the lower social economic classes, has not increased for the last two, three years. And while the concerns about affordability are one big factor here, there is a a possible other one, and that's the growing use of GLP1 weight loss drugs. How big of a piece of this demand puzzle is that for some of these brands?

It's hard to put a number on it, but everyone in the industry acknowledges GLP ones are having an effect. If you take them, generally people are are eating smaller portion sizes. They're often cutting back on sugars, uh maybe upping their protein. And so yeah, on net it's not great for selling higher volumes of of snack foods. LaGuarda of PepsiCo, again, he acknowledged we should assume there will be a broader adoption of GLP one medicines.

And he said they're trying to adjust in a variety of ways Building their markets for drinks like Gatorade, one of their fortified water brands, adding foods with fiber content. He said more than 70% of Pepsi's. US foods business was actually sold in single serve pack sizes and he suggested that that might be more amenable to people who are cutting back their intake. Well, I will be cutting back, Greg, but maybe starting after Super Bowl Sunday.

Uh that's the FT's US consumer editor, Greg Meyer. Thanks, Greg. Thank you, Mark.

Before we go, I want to bring in the briefings Monday host, Victoria Craig, for our weekly look ahead into the news crystal ball. Hi, Victoria. Hey, Mark. So you've got your eyes on another election in Japan this weekend. What's going on? Yeah, so Sane Takaichi, she is the country's first woman prime minister. She wants a mandate for quote major policy change which includes more spending.

To give you a little bit of the backstory on this, she won an internal party vote to become president of her Liberal Democratic Party last year. And now she wants a general election to get voter buy-in. So this has been Japan's shortest. ever post war general election campaign. She only called this snap election about two weeks ago, and it was only three months ago that she became the prime minister. So this is a move that almost no one saw coming.

Okay, so do we have an idea of the outcome of Sunday's election? Well Takeichi has become a bit of a phenomenon, especially among women in Japan, and so she could win a comfortable victory when voters head to the polls on Sunday. Critics though say that despite her popularity, her policies are light on detail and real solutions. Markets also haven't been convinced about Takaichi's approach, which at one point helped spark a sell-off in long dated government bonds.

I also want to mention, Mark, that the US president is not waiting for results of this election. In an unusual intervention on Thursday, Donald Trump said on social media that he gives Takaichi his quote complete and total endorsement

And he's invited her to the White House on March nineteenth. Certainly one to look out for. And we're also gonna be keeping an eye on a major election in Thailand. That one is also happening on Sunday. Victoria, thanks as always for joining me. You bet. Thanks, Mark. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News briefing. Check back next week for the latest business news.

The FT News briefing was produced this week by Henry Larson, Julia Webster, Sonia Hudson, Fiona Simon, and Victoria Craig. I'm your host and editor, Mark Filippino. Our show is mixed by Alex Higgins, Kent Millitzer, and Kelly Gary. We had help this week from Peter Barber, Michael Lelo, David DeSilva, and Gavin Coleman. Our executive producer is Topher Forges. The FT's global head of audio is Cheryl Brumley, and our theme song is by Metaphor Music.

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