China targets Nvidia with antitrust probe

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

1.

Tech war: China launched an antitrust investigation into Nvidia over suspected violations of anti-monopoly laws and conditions tied to its USD6.9 billion ($10.67 billion) Mellanox Technologies acquisition. Beijing’s approval of the deal in 2020 required Nvidia to avoid practices such as forced product bundling, unreasonable trade terms and discriminatory treatment of customers. State media reported that the State Administration for Market Regulation (SAMR) is reviewing possible breaches of those commitments. The probe comes shortly after the US imposed new restrictions on Chinese chipmakers, prompting China to counter with bans on critical chipmaking mineral exports. Nvidia, which has adapted to US curbs by selling modified chips to Chinese buyers, now faces pressure from Beijing to prioritise domestic alternatives like Huawei’s AI processors. Nvidia shares fell as much as 3.7% after the announcement, hurting investor sentiment across the broader US stock market. (Capital Brief)(FT)(Bloomberg)

2.

Banker swap: India unexpectedly replaced Shaktikanta Das, one of its longest-serving central bank governors, with Sanjay Malhotra, leaving markets uncertain about the Reserve Bank of India’s monetary policy direction. Malhotra, a career civil servant with over three decades of experience in financial services and taxation, takes over as the economy grapples with slowing growth—GDP fell to 5.4% in Q3, its slowest in nearly two years—and inflation exceeding the RBI’s 6% tolerance band. Das, who led the RBI since 2018 after Urjit Patel resigned amid government tensions, was known for stabilising government relations and steering the country’s financial recovery, but faced criticism over high borrowing costs and rising inflation. Malhotra’s monetary policy views are largely unknown and he will head a reshuffled Monetary Policy Committee, with deputy governor Michael Patra’s term also ending in January. Markets are now speculating on whether the central bank will pivot to rate cuts as early as February. (FT)(Reuters)

3.

Quantum leap: Google said it overcame a key challenge in quantum computing with its new generation chip "Willow", capable of solving problems significantly faster than classical computers. The company detailed its findings in the Nature journal, describing advancements in error correction—a persistent challenge in the field—by reducing error rates as quantum bits (or qubits) numbers scale. Willow’s 105 qubits maintain quantum states five times longer than earlier hardware. Experts likened the achievement to the first nuclear chain reaction, the FT reported. “This was theoretically proposed back in the 90s,” MIT physics professor William Oliver said. “We’ve been waiting for this result for many years.” Google estimates it needs 1 million qubits to achieve practical systems by the end of the decade, with costs projected at about USD1 billion, according to Google’s head of quantum Hartmut Neven.(Reuters)(FT)

4.

China stimulus: China’s Politburo announced a shift to a "moderately loose" monetary policy for 2025, its first move towards monetary easing in 14 years, coupled with a "more proactive" fiscal approach. The pivot from a “prudent” stance follows weak growth, deflation pressures and threats from US tariffs under Donald Trump’s second term. The announcement included plans to “stabilise” property and stock markets and strengthen “unconventional countercyclical measures,” though details on spending or rate adjustments were absent. Specifics could emerge after this week’s Central Economic Work Conference. “The wording in this Politburo meeting statement is unprecedented,” said Zhaopeng Xing, senior strategist at ANZ, adding, “The policy tone shows strong confidence against Trump threats.” Economists anticipate further rate cuts, asset purchases and a wider fiscal deficit at Beijing’s March legislative session. It came as November inflation data showed consumer prices rose 0.2% year-on-year, while producer prices dropped 2.5%, underscoring deflationary concerns. Markets rallied, with the Hang Seng Index gaining 2.8% and China’s 10-year bond yields hitting a record low of 1.92%. (Capital Brief)(Xinhua)(WSJ)(Bloomberg)

5.

Drone down: China is restricting exports of drone components to the US and Europe, with broader curbs anticipated in January, Bloomberg reported citing multiple unnamed sources. The limitations will impact the supply of drones critical to Ukraine’s defence against Russia, the publication said. It has already reportedly affected motors, batteries and flight controllers, with Chinese producers already capping or halting shipments, the sources said. The moves follow recent sanctions Beijing imposed on 13 US defence-related companies, including Shield AI, which has been active in Ukraine. China dominates about 80% of the global commercial drone market, and Western nations, heavily reliant on Chinese parts, are working to secure alternative supply chains. The US and European allies have accused China and its companies of aiding Russia’s drone programs, a claim China denies. On Saturday, the Pentagon committed almost USD1 billion in additional military aid to Ukraine, including “unmanned aerial systems”. (Bloomberg)

6.

ME moves: Egypt has condemned Israel’s actions in Syria as a “severe breach” of the 1974 armistice agreement, accusing it of exploiting a power vacuum to occupy Syrian territory. Israel expanded its military presence following the collapse over the weekend of Bashar al-Assad’s regime, with Defence Minister Israel Katz saying the military is creating a “security area” free of heavy weapons and militant infrastructure. The rebel group Hayat Tahrir al-Sham (HTS), which led a 12-day offensive that toppled Assad, announced plans for a transitional government. Israeli strikes have targeted chemical weapons sites and grounded aircraft, taking advantage of the absence of Russian-operated air defences. The US has also conducted strikes against ISIS, while Turkey-backed Syrian fighters have clashed with Kurdish forces in the north, The Financial Times reported. Qatar's foreign ministry said Israel's seizing of the buffer zone in Syria was "a dangerous development", Reuters reported. (FT)(Reuters)

7.

TikTok dance: China’s ByteDance and TikTok filed an emergency motion with the US Court of Appeals for the District of Columbia to block a law requiring ByteDance to divest TikTok by 19 January or face a US ban, pending a review by the Supreme Court. The companies warned the law could force TikTok, with over 170 million US users, to shut down domestically, impacting hundreds of service providers and global users. The Justice Department opposed the request. The move follows a three-judge panel upholding the law last week, leaving President Joe Biden to decide whether to grant a 90-day extension. The move comes while President-elect Donald Trump, who takes office 20 January, opposes the ban. ByteDance seeks a court decision by 16 December, Reuters reported. (Reuters)

8.

Insurance sale: Arthur J Gallagher will acquire AssuredPartners for USD13.45 billion ($20.82 billion) in cash to deepen its focus on property, casualty and employee benefits and expand in the US middle-market insurance sector. The deal, expected to close in Q1 2025, is the third major insurance broker deal in the past year. AssuredPartners was founded by GTCR in 2011 and generated USD2.9 billion in adjusted revenue in the 12 months to 30 September. The deal is expected to boost Gallagher’s adjusted profit by double digits. The company will finance the acquisition through cash, debt and equity, including an USD8.5 billion stock offering and a USD13.45 billion short-term loan. No investment bankers were involved in the negotiation, Reuters noted. Elsewhere, ad giant Omnicom unveiled its USD13 billion all-stock deal with Interpublic to create the world’s largest advertising agency, as reported by the WSJ a day earlier. (Reuters)(Gallagher statement)(Omnicom statement)