Monetary Illusion
NVDA'S China (but not Malaysia) ban. Smoot-Hawley Vibes But Different
Another Surprise Headline. Or Was It?
Afterhours:
Nvidia reports that the US government is banning their export of H20 products to China for the indefinite future. As a result, the company expects to report a $5.5 billion charge.
But wait, wasn’t this a ban Trump rescinded just last Wednesday after the bond market melted down?
April 9th: Trump administration backs off Nvidia's 'H20' chip crackdown after Mar-a-Lago dinner
Indeed it was. As Tom’s Hardware points out:
As it turns out, the Trump administration planned to ban shipments of Nvidia's H20 to China even ahead of May 15, when the Biden administration's AI Diffusion Rule is set to come into effect and prohibit sales of all American AI processors to Chinese entities.
…
However, it is unclear whether Nvidia is now allowed to sell H20 till May 15, or after May 15 too. If the latter is the case, we can only wonder whether to enable H20 exports to China the Trump administration will have to alter the Biden administration's AI diffusion rule, axe it altogether, or grant Nvidia export licenses to sell to big customers.
In a nutshell, THIS NEWS WAS ALREADY PRICED IN. The confusion is clear: Trump used Nvidia as a weapon to fool markets April 9th, and after the bounce, pulled forward the ban one month. It was going to go into effect May 15th regardless! Under Biden’s plan! But let’s give NVDA a reason to sell off 5% afterhours so well-positioned puts pay into MOPEX. ;-)
Am I surprised? NO!
I literally highlighted NVDA Monday morning in my live trading room. PRO subs can go review: Min 23.56 - 25.22. I literally said I expected NVDA to pull down into $106~ before most likely getting defended next week and moving higher into 124 with overshoot to 139 (best bullish case I’ve got before rejection).
I also am not surprised that Trump is punishing Nvidia:
DOES TRUMP WANT TO PUNISH NVIDIA?
"You have the most leverage, and you won't get your wrist broken."
From the above post:
"US sales relatively flat. Sales growth almost all due to "Singapore" and China.
Trump knows these tariffs are going to hurt Nvidia's precious 72% gross profit margins (that keep falling every quarter btw)."
Enter Malaysia. According to my fellow “twitter-rando”, Kakashii:
Malaysia is now dominating the Nvidia chip flow into Asia, and March has officially taken the crown as the biggest month ever for shipments to the country.
Let’s talk numbers:
* 2022: $817 million
* 2023: $1.276 billion
* 2024: $4.877 billion — an increase of almost 300% YoY
* 2025:
* January: $1.12 billion (!) — nearly 700% year-over-year increase (!)
* February: $626.5 million
* March: a record-breaking $1.96 billion (!) — an astonishing 3,433% increase from 2023 to 2025 (!)
But Trump says only Nvidia chip sales to China is not okay.
Pay-To-Play
Oh the games people play. So last Wednesday I posted,
EXACTLY after Bessent spoke, Trump posted the 10% tariffs stay in place but with 90 day pause on the reciprocal tariffs - EXCEPT China.
Think about that. US Tariffs on phones and laptops from China were withdrawn (Tim Cook hugely relieved as AAPL stock spikes 16% higher since Thursday), BUT components sourced from China and used in the assembly of electronics back in the US for all other businesses still have to pay proposed 125% tariffs?
The Strategy of Chaos Continues.
Pay-To-Play is not just for video games. Trump & Bessent know that CONCENTRATION RISK in mega-cap tech keeps the stock market bid. So both came out last Wednesday after the bond market melt-down, and lifted the bid. Great for wide-moat big-tech stocks, but unfortunately, small-to-medium US businesses were left in the cold, with few ways to navigate the coming tariff terrors, supply chain disruptions and the hits to margins.
Concentration of Power in large tech names may help keep equities bid, but it will not help US economy grow.
Apollo’s Chief Economist, Torsten Slok, on even a 22% effective tariff rate would have a -1.5% hit to GDP and +1.5% increase in inflation. Trump is threatening tariffs much higher that that on Asian imports to US.
Tariffs that will hurt the majority of US companies and consumers on aggregate in the real economy even if the stock market gives the illusion all is well.