President Donald Trump said members of his Cabinet would continue discussions with Lip-Bu Tan in the coming days after meeting with the Intel Corp. chief executive officer at the White House on Monday.
“The meeting was a very interesting one,” Trump said in a social media post. “His success and rise is an amazing story. Mr. Tan and my Cabinet members are going to spend time together, and bring suggestions to me during the next week.” Intel didn’t immediately respond to a request for comment on Tan’s meeting with Trump.
The warm remarks were a stark reversal from just four days earlier, when Trump called for Tan’s resignation and accused him of having conflicts of interest.
Trump last week wrote in a post on Truth Social that Tan should step down as chief of the American chipmaker, describing him as “highly CONFLICTED.”
The post came after Republican Senator Tom Cotton asked the chairman of Intel’s board to answer questions about Tan’s ties to China, including investments in the country’s semiconductor companies and others with connections to its military.
Tan has said he has the full backing of the company’s board and had reached out to the White House to clear up what he called “misinformation” about his track record.
The chipmaker’s shares jumped more than 2% in extended trading following Trump’s post on Monday. The stock declined 3.1% on Aug. 7, the day of the president’s initial remarks.
Nvidia Corp. and Advanced Micro Devices Inc. agreed to pay 15% of their revenues from chip sales to China to the US government as part of a deal with the Trump administration to secure export licenses, according to a person familiar with the matter.
Nvidia plans to share 15% of the revenue from sales of its H20 chip in China and AMD will deliver the same share from MI308 revenues, added the person, who asked for anonymity to discuss internal deliberations. The Financial Times earlier reported the development.
It followed a separate report from the Financial Times that the US Commerce Department started issuing H20 licenses on Friday, two days after Nvidia Chief Executive Officer Jensen Huang met President Donald Trump.
The Trump administration had frozen the sale of some advanced chips to China earlier this year as trade tensions spiked between the world’s two largest economies.
An Nvidia spokesperson said the company follows US export rules, adding that while it hasn’t shipped H20 chips to China for months, it hopes the rules will allow US companies to compete in China. AMD didn’t immediately respond to a request for comment.
Separately, Intel Chief Executive Officer Lip-Bu Tan is expected to visit the White House on Monday after Trump called for his dismissal last week over his ties to Chinese businesses, the Wall Street Journal reported Sunday.
Palantir Technologies Inc.’s meteoric rise is pushing the company’s valuation further into record territory, forcing bullish investors to bank on increasingly robust future growth to justify its current level.
Shares of the defense maker closed at another all-time high Friday, bringing gains since its 2021 debut to near 2,500%. The stock is up almost 150% this year, a rally underpinned by the company’s growing use of artificial intelligence, business ties to the US government and most recently, a stellarearnings report.
That surge has made Palantir eye-wateringly expensive compared to its peers: trading at 245 times forward earnings, it is the most richly-valued company in the S&P 500 Index. By comparison, chipmaker Nvidia Corp., another big gainer, trades at just 35 times forward earnings.
Palantir is “turning into a bit of a difficult valuation story to sell, but it’s a great company,” said Mark Giarelli of Morningstar Investment Service, who has sell-equivalent rating on the stock. The valuation “causes heartburn, but that’s the story right now.”
Plenty of Wall Street pros and retail investors alike are happy to hang on for now, wary of missing out on further upside. Still, it’s getting hard for them to ignore the increasingly high bar Palantir must meet to justify its performance over the longer term. Damian Reimertz of Bloomberg Intelligence estimates the company would need to generate $60 billion over the next 12 months to trade at a comparable valuation to its peers.
That calculation — based on a comparison of the software companies’ enterprise value-to-sales ratio — is many times higher than the $4 billion in revenues Wall Street expects Palantir to earn in fiscal 2025 or the $5.7 billion analysts forecast for next year.
Valuation is also a sticking point for Gil Luria, managing director and head of technology research at DA Davidson & Co. Luria praised Palantir’s quarterly results and called it “the best story in all of software” in a recent note.
But he estimates that the company would have to grow at 50% annually for the next five years and maintain a 50% margin in order to get its forward price to earnings ratio down to 30, in line with the likes of Microsoft Corp. and Advanced Micro Devices Inc. Palantir’s adjusted earnings per share are expected to grow at a 56% rate this year, falling to 31% and 33% in the next two years, respectively.
In a broader sign of Wall Street’s unease, more than twice as many analysts assign the stock sell or hold ratings than buy, according to data compiled by Bloomberg. Still, Palantir’s shares have become a must-own for portfolio managers concerned with beating performance benchmarks, said David Wagner of Aptus Capital Advisors, which holds shares of the company.
“There’s a lot of investors that just can’t ignore it,” said Wagner. “They don’t believe in the stock, but they’re tired of it just hurting them on a relative performance standpoint.”
‘Squint Your Eyes’
Palantir bulls are betting that the company’s business performance will support its stock price over the long term, a path taken by many of today’s Big Tech elite. Online streamer Netflix Inc., for instance, traded north of 280 times forward earnings at a 2015 peak, and now stands at a forward P/E of 40.
“Definitely Palantir is part of that AI craze, but not everything that goes to a valuation of 200 is a bubble,” said Que Nguyen, chief investment officer of equity strategies at Research Affiliates, referring to Netflix.
Brent Bracelin at Piper Sandler boosted his price target on shares to $182 from $170 following earnings and maintained his overweight rating. He is counting on the company to continue growing aggressively and sustain high free cash flow margins through 2030, aided by a market for defense spending estimated at $1 trillion in the US alone.
“You have to squint your eyes. You kind of have to believe that these audacious growth goals can be achieved,” he said.
Of course, there are numerous examples of stock rallies that cooled when companies couldn’t meet Wall Street’s elevated expectations. Shares of Tesla Inc. are down nearly 20% this year, in part because the company’s results aren’t keeping pace with its lofty valuation of about 148 times forward earnings.
While Palantir aced its most recent earnings report, its high valuation could exacerbate a selloff if the company stumbles in the future, said Morningstar’s Giarelli.
“Palantir is trading at such a high multiple relative to everyone else that there’s just so much gravity underneath their stock chart,” he said. “There’s a lot of room below the stock chart for it to reprice in a negative way because it’s had such a stellar run.”
For Mark Malek, chief investment officer at Siebert Financial, valuations remain a concern. Still, Palantir’s potential for growth has kept him holding on to the stock.
“It’s uncomfortable to buy it at these levels, but we’re not afraid to buy when stocks are overvalued,” he said. “Where else are you finding 30% growth rates out there?”
Alex Karp, chief executive officer of Palantir Technologies, during the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, on July 12, 2023.
US consumers probably experienced a slight pickup in underlying inflation in July as retailers gradually raised prices on a variety of items subject to higher import duties.
The core consumer price index, regarded as a measure of underlying inflation because it strips out volatile food and energy costs, rose 0.3% in July, according to the median projection in a Bloomberg survey of economists. In June, core CPI edged up 0.2% from the prior month.
While that would be the biggest gain since the start of the year, Americans — at least those who drive — are finding some offset at the gas pump. Cheaper gasoline probably helped limit the overall CPI to a 0.2% gain, the government’s report on Tuesday is expected to show.
Higher US tariffs have started to filter through to consumers in categories such as household furnishings and recreational goods. But a separate measure of core services inflation has so far remained tame. Still, many economists expect higher import duties to keep gradually feeding through.
That’s the dilemma for Federal Reserve officials who’ve kept interest rates unchanged this year in hopes of gaining clarity on whether tariffs will lead to sustained inflation. At the same time, the labor market — the other half of their dual policy mandate — is showing signs of losing momentum.
As concerns build about the durability of the job market, many companies are exploring ways to limit the tariff pass-through to price-sensitive consumers. Economists expect government figures on Friday to show a solid gain in July retail sales as incentives helped fuel vehicle purchases and Amazon’s Prime Day sale drew in online shoppers.
Excluding auto dealers, economists have penciled in a more moderate advance. And when adjusted for price changes, the retail sales figures will likely underscore an uninspiring consumer spending environment.
Among other economic data in the coming week, a Fed report is likely to show stagnant factory output as manufacturers contend with evolving tariffs policy.
A preliminary trade truce between the US and China is set to expire on Tuesday, but a move to extend the detente is still possible.
The Bank of Canada will release a summary of the deliberations that led it to hold its benchmark rate at 2.75% for a third consecutive meeting; it also left the door open to more cuts if the economy weakens and inflation is contained. Home sales data for July will reveal whether sales gains continued for a third straight month.
Elsewhere, several Chinese data releases, gross domestic product readings for the UK and Switzerland, and a possible rate cut in Australia are among the highlights.
Asia
Asia has a hectic data calendar, led by a wave of Chinese indicators, GDP reports from several economies, and a closely-watched rate decision in Australia. The week will see credit numbers from China, which will be assessed for signs that policymakers’ efforts to revive economic growth are beginning to bear fruit. Money supply data will offer a complementary signal on underlying liquidity conditions.
On Tuesday, the Reserve Bank of Australia is poised to lower policy rates for a third time this year after second-quarter inflation cooled further. A gauge of Australian business confidence due the same day will offer a timely read on sentiment heading into the second half. Wednesday brings Australia’s wages data, followed by the employment report on Thursday.
India reports CPI data on Tuesday, which will likely show prices cooled further in July from a year ago. Wholesale prices follow on Thursday, and will indicate whether cost pass-through remains muted.
Trade figures during the week will show how strong India’s external sector was before Trump imposed an additional 25% tariff on Indian goods over its ongoing purchases of Russian energy, taking the total import levy to 50%.
On Wednesday, Thailand’s central bank is expected to cut rates amid subdued price pressures and weak economic growth.
Thailand’s King Maha Vajiralongkorn has endorsed the appointment of Vitai Ratanakorn as the nation’s new central bank governor, capping a monthslong selection process that has been overshadowed by concerns over government attempts to erode the autonomy of the Bank of Thailand. Vitai is set to take office from Oct. 1, according to a Royal Gazette notification issued Sunday.
Also on Wednesday, New Zealand releases retail card spending data, South Korea publishes its unemployment rate for July, and Japan releases its producer price index — a gauge of wholesale inflation.
China’s big reveal comes on Friday, with a suite of July activity data including industrial production, retail sales, fixed asset investment, and jobless figures.
Also on Friday, Japan publishes preliminary estimates of second-quarter GDP, with forecasts suggesting the country likely avoided a recession.
Singapore, Malaysia, Taiwan and Hong Kong are among the other economies reporting GDP, providing a broader look at growth momentum and external balances across the region.
For more, read Bloomberg Economics’ full Week Ahead for Asia
Europe, Middle East, Africa
The UK will take prominence again with some key data reports. Following Thursday’s Bank of England rate cut, after which officials said they’re on “alert” for second-round effects from a spike in inflation, wage data will be released on Tuesday. Economists anticipate a slight slowdown in pay growth for private-sector workers.
Meanwhile, second-quarter GDP is expected to show economic momentum slowing sharply after a growth spurt at the start of the year, meshing with the BOE’s view that the economy has started to show more slack.
Much of continental Europe will be on holiday on Friday, and data may be sparse too. Germany’s ZEW index of investor sentiment comes on Tuesday. In the wider euro region, a second take of GDP, along with June industrial production, will be published on Thursday.
In Switzerland, still reeling from Trump’s imposition of a 39% tariff, initial data on Friday may reveal that the economy suddenly contracted in the second quarter, even before that trade shock hit. Investors will also be watching for any update on Bern and Washington inching toward a trade deal after all.
Norwegian inflation is set for Monday. Three days later, the central bank in Oslo is likely to keep its rate at 4.25% after its first post-pandemic cut in June surprised investors.
Recent data included weaker retail sales, rising unemployment and gloomier industrial sentiment, though price pressures have also appeared to be stickier. Most economists expect two more quarter-point cuts in Norway this year, in September and December.
Some monetary decisions are also due in Africa:
On Tuesday, Kenya’s central bank will probably adjust the key rate lower for a seventh straight time, from 9.75%, with inflation expected to remain below the 5% midpoint of its target range in the near term.
Uganda’s policymakers will probably leave their rate at 9.75% to gauge the impact of US tariffs on inflation and keep local debt and swaps attractive to investors.
On Wednesday, the Bank of Zambia may cut borrowing costs. Its real interest rate is the highest in six years, with the spread between the policy benchmark and the annual inflation rate at 1.5 percentage points in July after price growth eased.
Namibia may also lower its rate, to 6.5% from 6.75%, in a bid to boost the economy. Inflation there is near the floor of its 3% to 6% target range.
In Russia on Wednesday, analysts expect inflation to have fallen below 9% in July from 9.4% a month earlier.
Turkish central bank Governor Fatih Karahan will present the latest 2025 inflation outlook at a quarterly meeting on Thursday.
And finally, on Friday in Israel, inflation is expected to have eased to 3.1% in July from 3.3% a month earlier.
For more, read Bloomberg Economics’ full Week Ahead for EMEA
Latin America
Brazil’s central bank gets the week rolling with its Focus survey of market expectations. Analysts have been slowly trimming their consumer price forecasts, but all estimates remain well above the 3% target through the forecast horizon.
Data on Tuesday should show that Brazilian consumer prices for July ticked down ever so slightly from June’s 5.35% print, substantiating the central bank’s hawkish rate hold at 15% on July 30.
Chile’s central bank on Wednesday publishes the minutes of its July 29 meeting, at which policymakers delivered their first cut of 2025, voting unanimously for a quarter-point reduction, to 4.75%. The post-decision statement maintained guidance for more monetary easing in the coming quarters due to a weak labor market and slowing inflation.
Also due on Wednesday is Argentina’s July consumer prices report. Analysts surveyed by the central bank expect a slight uptick in the monthly reading from June’s 1.6%, with the year-on-year figure drifting lower from 39.4%.
Inflation in Peru’s megacity capital of Lima has been below the 2% midpoint of the central bank’s target range all year, but the early consensus expects the central bank to keep its key rate unchanged at 4.5% for a third straight meeting.
Colombia is all but certain to have posted an eighth straight quarter of growth in the three months through June.
The nation’s central bank, which in June highlighted that the economy had gained momentum, is forecasting a 2.7% rise in GDP this year and 2.9% in 2026, up from 1.7% in 2024.
The thing about trading stocks is everyone has an opinion. And right now there’s an unusual divergence in the market that’s as stark as man versus machine.
Computer-guided traders haven’t been this bullish on stocks compared to their human counterparts since early 2020, before the depths of the Covid pandemic, according to Parag Thatte, a strategist at Deutsche Bank AG.
The two groups look at different cues to form their opinions, so it’s not a shock that they see the market differently. While computer-driven fast-money quants use systematic strategies based on momentum and volatility signals, discretionary money managers are individuals looking at economic and earnings trends to guide their moves.
Still, this degree of disagreement is rare — and historically, it doesn’t last long, Thatte said.
“Discretionary investors are waiting for something to give, whether that’s slowing growth or a spike in inflation in the second half of the year from tariffs,” he said. “As the data trickles in, their concerns will either be proven right if the market sells off on growth fears, or the economy will remain resilient, in which case discretionary managers would likely begin to lift their stock exposure on economic optimism.”
Wall Street offers a lot of confident predictions, but the reality is nobody knows what will happen with President Donald Trump’s trade agenda or the Federal Reserve’s interest-rate policy.
With the S&P 500 Index hitting repeatedly hitting all-time highs, professional investors aren’t sticking around to find out. As of the week ended Aug. 1, they’d cut their equity exposure from neutral to modestly underweight on lingering uncertainty surrounding global trade, corporate earnings and economic growth, according to data compiled by Deutsche Bank.
“No one wants to buy pricier stocks already at records so some are praying for any selloff as an excuse to buy,” said Frank Monkam, head of macro trading at Buffalo Bayou Commodities.
Chasing Momentum
Trend-following algorithmic funds, however, are chasing that momentum. They’ve been lured into a buying spree after cut-to-the-bone positioning in the spring cleared the path to return in recent months as the S&P 500 rallied almost 30% from its April low. Through the week ended Aug. 1, long equity positions for systematic strategies were the highest since January 2020, Deutsche Bank’s data show.
This divergence underpins the tug-of-war between technical and fundamental forces, with the S&P 500 stuck in a tight range after posting its longest streak of tranquility in two years in July.
The Cboe Volatility Index — or VIX — which measures implied volatility of the benchmark US equity futures via out-of-the-money options, closed at 15.15 on Friday, near the lowest level since February. The VVIX, which measures the volatility of volatility, dropped for the third time in four weeks.
“The rubber band can only stretch so far before it snaps,” said Colton Loder, managing principal of the alternative investment firm Cohalo. “So the potential for a mean-reversion selloff is higher when there’s systematic crowding, like now.”
This kind of collective piling into a trade periodically happens with computer-driven strategies. In early 2023, for instance, quants loaded up on US stocks on the heels of the S&P 500’s 19% drop in 2022, until volatility spiked in March of that year during the regional banking tumult. And in late 2019, fast-money traders powered stocks to records after a breakthrough in trade talks between Washington and Beijing.
This time around, however, Thatte expects this split between man and machine to last weeks, not months. If discretionary traders start selling in response to weaker growth or softening corporate earnings trends, pushing volatility higher, computer-based strategies are likely to begin to unwind their positions as well, he said.
In addition, fast-money investors will likely reach full exposure to US equities by September, which could prompt them to sell stocks as they become vulnerable to downside market shocks, according to Scott Rubner of Citadel Securities.
CTA Risk
Given how systematic funds operate, selling may start with commodity trading advisors, or CTAs, unwinding extreme positioning, Loder said. That would increase the risk of sharp reversals in the stock market, although there would need to be a substantial selloff for a spike in volatility to last, he added.
CTAs, who have been persistent stock buyers, are long $50 billion of US stocks, putting them in the 92nd percentile of historical exposure, according to Goldman Sachs Group Inc. However, the S&P 500 would need to breach 6,100, a decline of roughly 4.5% from where the index closed on Friday, for CTAs to begin dumping stocks, said Maxwell Grinacoff, head of equity derivatives research at UBS Group AG.
So the question is, with quant positioning this stretched to the bullish side and pressure building in the stock market due to extreme levels of uncertainty, can any rally from here really last?
“Things are starting to feel toppy,” said Grinacoff, adding that the upside for stocks “is likely exhausted” in the short run given that CTA positioning is near max long. “This is a bit worrisome, but it’s not raising alarm bells yet.”
What’s more, any pullback from systematic selling would likely create an opportunity for discretionary asset managers who missed out on this year’s gains to re-enter the market as buyers, warding off a more severe plunge, according to Cohalo’s Loder.
“Whatever triggers the next drawdown is a mystery,” he said. “But when that eventually happens, asset-manager exposure and discretionary positioning is so light that it will add fuel to a ‘buy the dip’ mentality and prevent an even bigger selloff.”
Vinay Prasad, who was recently ousted as the top vaccine and gene therapy regulator at the US Food and Drug Administration, is returning to his role, the Department of Health and Human Services said Saturday.
Prasad is returning at the FDA’s request, HHS spokesperson Andrew Nixon said in a written statement. “Neither the White House nor HHS will allow the fake news media to distract from the critical work the FDA is carrying out under the Trump administration,” Nixon said.
Prasad will resume leadership of the Center for Biologics Evaluation and Research, Nixon said. It’s unclear whether he will also retake two other roles he held at the agency as chief science officer and chief medical officer.
Prasad abruptly departed the agency on July 29 after a conservative backlash in part over his handling of safety issues with Sarepta Therapeutics Inc.’s gene therapy. Laura Loomer, an ally of Donald Trump, had said he was not aligned with the president’s agenda and has aggressively lobbied against his return.
FDA Commissioner Marty Makary told reporters on Monday that he was trying to persuade Prasad to return to the agency.
Though Prasad was in his role for less than three months before his ouster, he managed to stir controversy at the agency. He demanded more studies of Covid vaccines, overruled his own scientific review staff and took a confrontational approach that gave critics fodder to claim he could stymie scientific innovation.
Prasad and Makary asked Sarepta last month to stop shipping Sarepta’s treatment for Duchenne muscular dystrophy, Elevidys, following three deaths that were linked to the company’s gene therapies. Sarepta initially refused, then relented, leading to an outcry that the agency had overstepped.
Shares in biotech firms soared on news of Prasad’s departure from the agency. His return was reported earlier by Endpoints News.
Wall Street economists disagree on what’s behind a sharp slowdown in US job growth, highlighting a divide that is central to the broader outlook for the economy.
Some argue the pullback in hiring mostly reflects a smaller supply of workers, thanks in part to President Donald Trump’s immigration crackdown. Others say the slowdown is largely due to a more concerning retrenchment in demand.
The distinction is critical. If difficulty finding workers is the main factor, weak hiring trends probably aren’t foreshadowing wider layoffs, and the Federal Reserve can keep interest rates high. But if hiring is mostly slowing because of waning demand for labor, that would call for the central bank to intervene.
“Whether what we’re seeing is all immigration effects or if it’s true demand effects is definitely the key question,” said Veronica Clark, an economist at Citigroup Inc. “There very likely are some immigration effects in the data, but details also suggest weaker demand unrelated to immigration, which seems to be getting worse.”
The latest jobs report from the Bureau of Labor Statistics, published on Aug. 1, shocked financial markets with weak hiring figures for July and steep downward revisions to the prior two months. It was such a surprise that Trump fired the head of BLS, accusing the agency, without evidence, of rigging the numbers to make him look bad.
Those adjustments brought the pace of payroll growth down to just 35,000 on average over the last three months, the slowest since 2020. While the unemployment rate edged up to 4.2% in July, matching the highest level since 2021, it’s still not much different than where it’s been over the past year.
Analysts spent an unusual amount of time over the following week continuing to dissect the report. The Trump administration’s dramatic changes in trade and immigration policy this year have made the job of reading the labor market much more challenging, just as those shifts have raised the stakes for continued economic expansion.
Read More: Autopsy of a Black Swan — July’s Payroll Revisions
The key question hinges on the impact of reduced immigration. Two days before the release of the report, Fed Chair Jerome Powell told reporters the Fed would discount a slowdown in hiring in the months ahead as long as the unemployment rate doesn’t rise.
The Fed chief even suggested the so-called breakeven rate — the number of jobs the US economy needs to add each month to keep the unemployment rate stable — could be as low as zero, given what’s happening with immigration.
Powell’s interpretation, and the jobs report itself, sorted Wall Street into two main camps. Many top economists — including those at Morgan Stanley, Barclays Plc and Bank of America Corp. — pointed to signs that the hiring slowdown was more about reduced labor supply, predicting that the Fed would wait to begin cutting rates until at least December.
Other economists — such as those at Goldman Sachs Group Inc., Citigroup Inc. and UBS Group AG — interpreted the rapid deterioration in hiring more as a sign of weak labor demand, which would push the Fed to commence with rate reductions at its next policy meeting in September.
“We see little contradiction between slow employment growth and a low unemployment rate when the effects of immigration controls are taken into account,” Morgan Stanley economists led by Michael Gapen wrote in an Aug. 1 report following the release of the figures. Still, given how quickly hiring appears to be slowing, “it would not take much for us to alter our views,” they said.
Both sides marshaled various data points to support their analysis. The problem is nothing amid the plethora of statistics contained in the jobs report itself can definitively answer the question one way or the other.
Immigration Policy
The report does include a breakdown of foreign and native-born workers based on a survey of households, and the numbers indicate the foreign-born workforce and population has fallen by about a million over the last three months — a number administration officials were quick to seize on in touting their immigration policy achievements.
“Since the president took office, he created about 2.5 million jobs for Americans, whereas we’ve eliminated about a million jobs for foreign-born workers,” Stephen Miran, chair of the White House Council of Economic Advisers, said in an Aug. 1 CNN TV appearance.
“That’s a result of our strong immigration policy, of our strong border policy, keeping America safe,” said Miran, whom Trump nominated Thursday to fill a temporary slot on the Fed’s Board of Governors.
But many analysts, including those at Bloomberg Economics, have written off the decline in the labor force, noting it is largely related to how the data are constructed. Many economists point to a simultaneous, implausible surge in the native-born workforce and population numbers.
“It’s not that we’ve suddenly given birth to a lot of 16-year-olds and boosted the native population,” said Jonathan Pingle, the chief US economist at UBS.
With the report’s demographic breakdown based on the household survey looking increasingly questionable, analysts are trying to focus more on what the data on hiring from a survey of businesses — the one that saw the big downward revisions for May and June — is saying.
The best way to do that is to come up with a list of industries most reliant on an immigrant workforce and try to estimate whether those are faring obviously worse. And different people are drawing different conclusions from essentially the same exercise.
Bank of America economists highlighted weak hiring in construction, manufacturing and leisure and hospitality, sectors where undocumented immigrants and those who are losing their legal status are more likely to be employed. Goldman Sachs economists, meanwhile, noted industries most reliant on immigration aren’t really seeing slower job growth than, say, those disproportionately exposed to tariffs.
The labor force participation rate has fallen 0.4 percentage point over the last three months, marking the biggest such drop in eight years, excluding the onset of the pandemic.
Those who see immigration as the culprit behind the hiring slowdown cite the drop in participation as an indicator of dwindling supply. Citi’s Clark said worsening demand conditions could be weighing on it too.
“Both of those issues would imply labor supply falling this year — slowing immigration and weak demand, as labor force participation typically falls in downturns,” Clark said. “But if weak demand is the more overwhelming force, it won’t be enough to keep the unemployment rate from rising.”
A Taiwanese investigation into the possible theft of chip technology at Taiwan Semiconductor Manufacturing Co. is putting a low-profile, lesser-known tech linchpin in Japan under unusual scrutiny.
Among the six people arrested by Taiwanese prosecutors for allegedly stealing trade secrets from the world’s largest contract chipmaker was a former employee at Tokyo Electron Ltd. Now, the Japanese company—one of the world’s biggest suppliers of chipmaking tools—is struggling to address the potential fallout with one of its most important customers and with governments in Tokyo and Taipei.
Tokyo Electron said that it fired an employee at its Taipei unit in connection with the case and is cooperating with the ongoing investigation. Its shares recouped some of the week’s losses Friday but remain down more than 4% since the TSMC news emerged.
Taiwan makes the most advanced semiconductors in the world and its companies have regularly been targeted for their intellectual property by entities with ties to China, which is pushing hard to develop its own chip capabilities. The Tokyo Electron arrest raises questions about why its employee would be involved in such an endeavor, whether it would have any motivation to steal TSMC trade secrets and whether the case ties into Japan’s own ambitions to build a domestic chip industry.
“The fact that Tokyo Electron has come under the spotlight in this way feels like an unfortunate accident,” said Atsushi Osanai, a professor at Waseda University.
On Wednesday morning, in team meetings around the organization, Tokyo Electron employees were instructed to refrain from talking about the matter, people familiar with the matter said, asking not to be named describing private information. Company managers flew to Taiwan to deal with the aftermath, one person said.
So far, the company has not found evidence that trade secrets were shared with third parties, Tokyo Electron said. It said it was unable to provide further details on a case under judicial review.
Taiwanese prosecutors have not disclosed many details of their investigation and have not identified who they think was behind the six people arrested.
Alongside Applied Materials Inc. and Lam Research Corp., Tokyo Electron plays a low-profile but crucial supporting role to the world’s chipmakers including TSMC, Samsung Electronics Co. and Intel Corp., making machines that coat, etch, process and clean silicon wafers to create semiconductors.
Chip industry veterans say they see no clear reason for Tokyo Electron to engage in an act of intellectual property theft and risk its relationship with TSMC, the supplier to Nvidia Corp. and Apple Inc. and the world’s biggest spender on chipmaking equipment. Tokyo Electron is privy to its customers’ 10-year technological roadmaps, essential to better propose and develop the most effective chip gear, and that collaboration helps it maintain its technological lead over rivals, its Chief Executive Officer Toshiki Kawai has said.
“TSMC is Tokyo Electron’s most important customer and the central player in the semiconductor industry,” said Osanai. “It’s hard to imagine that the company would risk losing all of that by engaging in any wrongdoing.”
Like much of corporate Japan, Tokyo Electron has been caught in the crosshairs of growing tensions between its two largest trading partners, the U.S. and China. Roughly 40% of the chip tool maker’s sales come from China, but that revenue is taking hits from U.S. export curbs on technology: It can’t sell some of its most advanced equipment into China, and Beijing is now spending billions of dollars to encourage the growth of home-grown chip gear makers.
The controversy also comes at a low point for Tokyo Electron. Last week, its shares plunged 18% after cancellations of expected orders alongside a lull in Chinese demand forced the Tokyo-based company to slash its earnings outlook.
Tokyo Electron plays a low-profile but crucial supporting role to the world’s chipmakers including TSMC, Samsung and Intel, making machines that coat, etch, process and clean silicon wafers to create semiconductors.
For more than three decades, Lip-Bu Tan invested in the Chinese economic boom, placing the kind of no-brainer bets that enriched venture capitalists and fund managers around the world and across the U.S.
He set up a venture firm called Walden International based in San Francisco that pumped more than $5 billion into over 600 companies. More than 100 of those investments were made in China, including deals with once-obscure startups such as Semiconductor Manufacturing International Corp.—today China’s largest chipmaker—where he served on the board for a decade and a half.
In recent years, as U.S.-China tensions escalated, Washington increasingly restricted Beijing’s access to advanced technology and placed tighter limits on the ability of U.S. companies to do business there. And Tan’s efforts to distance himself from Chinese investments accelerated with his appointment at Intel Corp. in March, when he agreed to divest his holdings there, according to a person familiar with the arrangement.
That hasn’t stopped U.S. lawmakers—and, now, Donald Trump—from holding Tan’s past Chinese affiliations against him. The U.S. president called the executive “highly conflicted” in a social media post and urged him to resign.
Intel has said Tan and the board are “deeply committed to advancing U.S. national and economic security interests.” Late on Thursday, Tan said he’s got the full backing of the company’s board, responding for the first time to Trump. “We are engaging with the Administration to address the matters that have been raised and ensure they have the facts,” he said in a letter to staff posted on Intel’s website.
Here’s what we know about Tan’s business dealings in China.
Walden
He started work at a venture capital firm in the 1980s called Walden Ventures, where he helped create a spinoff named Walden International that focused on overseas opportunities.
Tan, a Mandarin speaker born in Malaysia, helped the company make investments all over East Asia, including China. He pushed some of Walden’s funds into the then-unfashionable area of chip investing. Most venture capitalists had moved away from the industry, figuring that it was impossible to challenge giants such as Intel with startup money. But Tan played those odds.
Today, the executive is still chairman of Walden International. And he’s the founding managing partner at Walden Catalyst Ventures, which focuses on investments in the U.S., Europe and Israel. He also serves in that role at another venture fund, Celesta Global Capital.
Tan and Walden have faced scrutiny for China-related investments before. In 2023, the House Select Committee on the Chinese Communist Party sent Walden a letter expressing concerns and seeking more information on the types of companies and amount of investments made there.
SMIC
Headquartered in Shanghai, SMIC was founded in 2000 as an early attempt to bring advanced chip-making to China.
Walden International was one of the big investors when the startup raised $630 million from a group of venture firms in 2003. Tan was a director on SMIC’s board until 2018.
The Chinese company, whose customers at one time included Qualcomm Inc., is attempting to break into the outsourced chip production business dominated by Taiwan Semiconductor Manufacturing Co.
In 2020, that effort took a serious blow when the U.S. Commerce Department put SMIC on the so-called entity list, citing ties with the Chinese military. That means businesses need licenses to supply the Chinese company with technology. The move effectively cut it off from crucial U.S. vendors. Today, it’s a key partner to major Chinese sector players including Huawei Technologies Co.
Cadence
Tan stepped out of the venture world and joined the chip industry full-time when he became interim head of San Jose, California-based Cadence Design Systems Inc. in 2008. The executive, who had previously served on the board, went on to take the permanent CEO job the next year. He stayed in the role until 2021, when he transitioned to executive chairman, and is widely credited with restoring the company’s fortunes.
In late July of this year, the Department of Justice announced a plea deal that cost Cadence more than $100 million in fines. Employees at Cadence’s China unit allegedly hid the name of a customer—the National University of Defense Technology—from internal compliance in order to keep supplying it. That organization had been put on the Department of Commerce’s blacklist in 2015. The Chinese university was one of a group of supercomputer operators there that had conducted simulations of nuclear explosions, the DOJ said.
Cadence got a 20% reduction of the statutory maximum fine because of its partial cooperation with the investigation, according to the DOJ’s statement, which didn’t mention Tan.
Still, his connection to the company was cited this week by U.S. Senator Tom Cotton, who wrote to Intel Chairman Frank Yeary questioning whether what happened at Cadence under Tan’s tenure makes him fit for his current job.
Current status
Tan spent time on the boards of other Chinese companies, such as Advanced Micro-Fabrication Equipment Inc. But he doesn’t, according to Bloomberg data, currently serve on a board of any company based in that country.
Though Walden International has invested in more than 100 Chinese companies over the years, that involvement has been scaled back, according to PitchBook. Walden International, Walden Catalyst Ventures and Celesta now just have stakes in a handful of companies based in China, including Hong Kong, the site shows.
Lip-Bu Tan set up a venture firm called Walden International that pumped more than $5 billion into over 600 companies. More than 100 of those investments were made in China.
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