Nvidia Sinks As AI Funding Fears Hit Global Chip Stocks

Summary

Nvidia fell after reports it was discussing financing guarantees and funding support for OpenAI data centres, raising fresh concerns about the sustainability of AI infrastructure spending. Chipmakers came under heavy pressure globally, with ASML dropping sharply after reports of advances in China's domestic lithography technology, while Asian semiconductor stocks sold off heavily. The US dollar remained under pressure as traders continued to scale back safe-haven positions, while oil prices extended recent declines following the easing of US-Iran tensions.

Equities

The FTSE 100 closed 0.4% higher on Monday at 10,781.75, while the FTSE 250 gained 0.6%, as improving risk sentiment followed the weekend pause in US-Iran hostilities. Lower oil prices supported travel and consumer-facing shares, although the sharp decline in energy stocks limited gains across the wider London market. Investors also looked ahead to a busy week of corporate earnings and interest rate decisions from both the US Federal Reserve and the Bank of England.

Vodafone closed 4.8% higher on Monday after raising its financial guidance to reflect the inclusion of its Safaricom transaction. The telecoms group said it now expects earnings to reach the upper end of its revised outlook, helping lift the FTSE 350 telecoms sector by 3.9%.

AstraZeneca finished 1.7% higher after reporting second-quarter profits ahead of expectations while reaffirming both its full-year and longer-term financial guidance. The update helped lift the pharmaceutical sector 1.8%, providing further support for the FTSE 100.

Travel stocks also advanced as easing geopolitical tensions reduced pressure on fuel costs. British Airways owner IAG gained 1.5%, while Whitbread, the owner of Premier Inn, added 1.0%. In contrast, Vesuvius fell 12.8% after reporting lower first-half profits, making it the weakest performer on the FTSE 250. Energy shares also came under pressure as oil prices retreated, with the sector falling 1.5%.

In the US, the Dow Jones Industrial Average closed 0.51% higher on Monday, while the S&P 500 edged up 0.02% and the Nasdaq slipped 0.18%. Investors focused on upcoming quarterly results from Microsoft, Amazon, Meta and Apple, while attention also turned to Wednesday's Federal Reserve interest rate decision and Friday's US inflation data.

Microsoft rose 1.9%, Walmart gained 2.1% and Johnson & Johnson added 1.0%, helping keep the S&P 500 in positive territory. Investors continued to assess last week's results from Tesla and Alphabet, which reignited concerns about heavy artificial intelligence spending.

Semiconductor shares remained under pressure, with the Philadelphia Semiconductor Index falling a further 2.2%, extending its recent sell-off. Oil producers also weakened as Brent crude prices fell sharply following the suspension of US air strikes against Iran, with Occidental Petroleum closing 4.1% lower and Exxon Mobil ending the session down 1.4%.

Forex & Commodities

The US dollar remained close to a one-month high early on Tuesday as investors continued to weigh the possibility of another Federal Reserve interest rate increase at the conclusion of this week's policy meeting. Although easing oil prices reduced some inflation concerns, the dollar stayed well supported as US Treasury yields retreated only modestly. The dollar index slipped slightly to 101.5, while the euro strengthened to $1.138 and sterling edged higher to $1.330. Against the Japanese yen, the dollar traded at 163.7. Markets are now pricing a 37.9% chance of a 25 basis point Fed rate increase this week, up sharply from 16% just a week ago, with expectations for a September increase climbing to around 81%.

Spot gold declined early on Tuesday, falling to $4,046 per ounce as the firmer US dollar made the precious metal more expensive for overseas buyers. Investors remained cautious ahead of the Federal Reserve's interest rate decision on Wednesday, with markets looking for any indication of whether policymakers are preparing the ground for a further tightening of monetary policy. President Donald Trump also said the United States was holding "good talks" with Iran and believed there was a chance of reaching an agreement, although he warned that military action could resume if negotiations failed. Silver traded at $57.23 per ounce, platinum at $1,606 and palladium at $1,271.

Oil prices fell sharply late on Monday after the United States paused its military strikes against Iran, raising hopes that diplomacy could help ease tensions in the Middle East. Brent crude settled 8.7% lower at $88.36 a barrel, while US West Texas Intermediate crude ended 7.5% lower at $82.61, with both benchmarks closing at their lowest levels in more than a week. Despite the sharp decline, traders remain cautious as shipping through the Strait of Hormuz continues to run at well below normal levels and physical oil supplies from the region remain constrained. Kazakhstan also confirmed that oil loadings at its main Black Sea export terminal had resumed after earlier disruption, providing some additional reassurance over global supply.