Chips slide as the market waits for Big Tech to justify itself

The chips come off the table

The Nasdaq fell again on Friday as the slump in semiconductor shares extended into another session, according to the Wall Street Journal. The selling was broad enough that the ranking at the top of the market moved: Apple narrowly overtook Nvidia to reclaim the position of most valuable listed company, with Nvidia holding on only just behind.

Part of the pressure came from Beijing. China's Moonshot AI released a new model that investors read as a sign the cost of building competitive artificial intelligence may be falling, and the Journal reported that this added to the worries already weighing on chip investors. Cheaper models raise questions about how much hardware the industry actually needs to buy.

That question now points directly at the coming earnings season. City A.M. set out the test facing the large technology companies after what it called an AI spending spree: having committed enormous sums to data centres and processors, they must show investors the returns. The reports will be scrutinised for whether the outlay is turning into revenue or simply into depreciation.

A different voice at the Fed

Writing in This is Money, Hamish McRae argued that there is now what he termed a grown-up at the US Federal Reserve. The column read the central bank's recent conduct as steadier and more predictable than the political noise around it might suggest.

The observation lands against the backdrop of the chip selloff. When the largest weightings in the index are moving on doubts about a single technology, the tone set by the central bank matters for how the rest of the market behaves.

McRae's piece was one of comment rather than data, and it made no forecast about rates.

Water, coal and shareholder patience

The UK utility sector produced two separate flashpoints. This is Money reported that United Utilities suffered one of the largest shareholder revolts of the year, a rebuke registered through the votes at its meeting. The Guardian, meanwhile, reported that the chief executive of Wessex Water received an above-inflation pay rise even though the company was subject to a bonus ban imposed over sewage spills. The pay rise and the bonus ban sat side by side in the same set of accounts.

Elsewhere in the sector's orbit, the Guardian reported that the Bank of England will stop accepting bonds linked to coal as collateral for some of its key lending operations. It is a narrowing of what the central bank is willing to hold against its loans, and it applies to the assets firms can pledge rather than to any single company.

The two water stories share a theme without being the same story. In one, investors expressed displeasure through their votes; in the other, a regulator's penalty on bonuses ran alongside a rise in fixed pay.

Around the edges

Several smaller items filled out the weekend. This is Money reported that mortgage rates rose, which it framed as a setback for Andy Burnham, and in a separate piece examined criticism that cash from his flagship fund was going to whoever, in its phrase, shouts loudest. Both concerned the mechanics of how public money and lending costs are moving in the North of England.

On the retail investing side, This is Money noted that Moneysupermarket has launched what it described as a low-cost investment platform offering access to Vanguard funds, adding another entrant to the market for cheap fund access.

Two human-scale stories rounded off the material. The BBC reported that private jets are flocking to Montana while local residents cannot afford the trailer park, a study in what a rush of wealth does to a small place. And the Guardian reported that iceberg lettuce has been recalled across 27 US states over cyclospora contamination, with more products possibly to follow. Neither is a market story in the narrow sense, but both describe money and consequence in plain terms.