AI chips face toughest US export rules

Good morning. Here's what happened overnight and what you need to know today.

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1.

AI control: The US announced sweeping new restrictions on exporting advanced AI chips and technology to over 120 countries, blocking adversaries like China, Russia and Iran. Introduced in the final days of President Joe Biden's administration, these are the most extensive AI export restrictions yet, capping a four-year effort to solidify US dominance in global AI development and limit China’s military advancements. Effective in 120 days, the rules impose strict licensing limits for over 120 nations while exempting 18 allies, including Japan, the UK and the Netherlands. Companies exporting AI technology must meet stringent security and human rights standards, and cloud providers may seek authorisation to establish data centres globally. Gaming chips and low-capacity AI models are unaffected. Nvidia criticised the rules as "sweeping overreach," while China condemned them as a trade violation. Nvidia's shares fell as much as 4.7% - impacted by a report claiming major clients were delaying orders of its latest Blackwell AI chip racks. AMD (1.4%), Intel (2%) and cloud providers such as Microsoft, Amazon and Alphabet (1-2%) also fell. (Capital Brief)(White House statement)(The Information)(Nvidia statement)(Bloomberg)(Reuters)

2.

Tariff exposure: China’s exports surged 10.7% in December 2024, driving the country’s trade surplus to a record USD992 billion ($1.61 trillion) for the year, amid a rush to frontload shipments ahead of anticipated US tariffs under the incoming Trump administration. Imports rose just 1% year on year in December, reflecting weak domestic demand. Sectors like electric vehicles, batteries, and solar panels saw strong growth, but China’s reliance on global markets to offset weak domestic demand leaves it vulnerable to looming US tariffs. Economists attributed the export surge to front-loading ahead of potential tariffs, though US and European Union levies on Chinese goods will likely dampen trade growth in 2025. “All eyes are on January 20 — Trump’s first day in office — to see whether he will follow through on his rhetoric and impose tariffs on Canada, Mexico and China from day one,” said Pantheon Macroeconomics economist Kelvin Lam. (Capital Brief)(FT)(Bloomberg)(Reuters)

3.

Ackman’s move: Bill Ackman’s Pershing Square Capital Management proposed merging a subsidiary with NYSE-listed Howard Hughes Holdings to reshape the company into a “modern-day Berkshire Hathaway.” Under the plan, Pershing will buy 11.8 million shares it doesn’t already own for USD1 billion at USD85 per share, and Howard Hughes will repurchase USD500 million of stock at the same price. The move would increase Pershing's stake from 38% to 61.1-69.2%, depending on how many investors agree to the buyout, the company said. In a letter to the Howard Hughes board, Ackman, a former chairman of the real estate company, said long-term shareholders had been displeased with the stock performance and were keen on a potential deal. “With apologies to Mr. Buffett, HHH would become a modern-day Berkshire Hathaway that would acquire controlling interests in operating companies,” Ackman said in the letter. (Pershing Square letter)(Capital Brief)(Bloomberg)(Reuters)

4.

Credit due: Goldman Sachs will merge three key businesses from its global banking and markets division into a new unit, Capital Solutions Group, to capitalise on the growing private credit market dominated by firms like Apollo, Oaktree and Ares. The unit will focus on private credit, mega deals, corporate loans and alternative financing solutions such as asset-backed lending. It will also expand the alternatives investment team in Asset & Wealth Management. Pete Lyon, head of the financial institutions and strategic investors groups, and Mahesh Saireddy, head of mortgages and structured products, will lead the unit and join Goldman’s management committee. The restructuring comes amid expectations of a surge in capital demand driven by a rebound in dealmaking, private-equity activity and corporate investment in technology and infrastructure. With public and private markets converging, Goldman aims to better meet that demand. (Capital Brief)(GS statement)(WSJ)

5.

Looming truce: Mediators in Doha presented Israel and Hamas with a final ceasefire draft on Monday following a "breakthrough" in negotiations attended by envoys of both Joe Biden and Donald Trump, Reuters reported citing an unnamed official. The proposal to halt the war and exchanging hostages was brokered by Qatar, with participation from US envoys Steve Witkoff and Brett McGurk, alongside Israeli and Egyptian officials. Israeli Foreign Minister Gideon Saar praised US efforts, while Hamas confirmed progress but highlighted unresolved issues. Trump’s January 20 inauguration is seen as a critical deadline, with the president-elect previously warning of "hell to pay" if hostages are not freed by then. The war, sparked by a Hamas attack in October 2023, has claimed over 46,000 lives in Gaza and 1,200 in Israel. Despite the talks, Israeli airstrikes on Monday killed 21 people, with resistance from Israeli hardliners opposing any deal short of Hamas’ destruction threatening the fragile progress. (Reuters)

6.

Zero efforts: The Net-Zero Asset Managers (NZAM) initiative has suspended its activities following the departure of BlackRock, the world’s largest asset manager, which left the group on 9 January, Reuters reported citing a letter to members. BlackRock left cited confusion over its climate efforts and legal inquiries from US public officials. NZAM, comprising 325 members managing USD57.5 trillion in assets (before BlackRock’s departure), is conducting a review of its structure to address “recent developments in the US” and varying regulatory expectations. Pending that review, it has paused tracking member commitments, removed signatory lists and case studies from its website, and suspended reporting. BlackRock’s exit comes amid escalating pressure from US Republican politicians opposing ESG assessments, including congressional inquiries and lawsuits alleging negative impacts on coal production and energy prices. The challenge mirrors struggles faced by Climate Action 100+, another investor climate group that lost influence due to member withdrawals. (Reuters)

7.

Neuro deal: Johnson & Johnson will acquire Intra-Cellular Therapies for USD14.6 billion ($23.70 billion), offering USD132 per share, a 39% premium to the prior close. The acquisition will add Caplyta, an oral treatment approved in the US for schizophrenia and bipolar depression, to J&J’s neurological drug portfolio. Caplyta generated USD481.3 million in sales during the first nine months of 2024 and has patent protection until 2040. Analysts predict its annual sales could exceed USD1 billion in 2025 and reach USD4 billion by 2030 if regulatory approval expands its indications. Intra-Cellular also brings experimental drugs, including ITI-1284, under development for anxiety and Alzheimer’s-related psychosis. The deal, expected to close in 2025, aligns with J&J’s efforts to counter losses from Stelara’s expired patent. However, overlap with J&J’s current depression and schizophrenia drugs may draw antitrust scrutiny. Meanwhile, shares of rival Moderna plunged after the biotech company’s 2025 revenue guidance lagged Wall Street expectations. (WSJ)(Reuters)

8.

Apple crunch: Apple’s global iPhone sales fell 5% in the last quarter of 2024, as competition from Chinese manufacturers like Xiaomi and Vivo increased, Bloomberg reported citing Counterpoint Research data. Apple’s market share slipped to 18% globally, with full-year sales down 2%, despite the smartphone market growing 4% overall. The company’s delayed AI features, unavailable in China, contributed to the mixed reception of the iPhone 16. Chinese vendors captured 56% of global shipments in Q4, while Apple’s Pro models dominated its sales in China. Meanwhile, in the UK, Apple is contesting a £1.5 billion ($2.44 billion) class-action lawsuit over its App Store fees, which allegedly overcharged 20 million users. The company denies wrongdoing and argues its fees reflect the benefits of its ecosystem, and that most developers pay no fees. The 7-week trial is the UK’s first tech giant class action trial, with similar cases pending against Google and others. (Bloomberg)(Reuters)