The Biden administration is considering implementing country-specific caps on the export of advanced artificial intelligence (AI) chips produced by companies like Nvidia and Advanced Micro Devices (AMD).

This potential policy, driven by national security concerns, seeks to regulate how AI technologies are distributed globally, with a particular focus on limiting the AI capabilities of certain nations.

The move could place restrictions on exports to countries with growing AI ambitions, such as those in the Persian Gulf, where the appetite for AI data centers is rising.

The caps would form part of a broader strategy by the US to maintain its technological edge while preventing AI technologies from being used in ways that could pose risks to global security.

Tighter controls to build on existing chip export restrictions

The proposed restrictions would add to existing limitations on AI chip sales, which initially targeted China.

In 2021, the Biden administration introduced sweeping regulations that curtailed exports of AI chips to over 40 countries, citing fears that advanced technology could be diverted to China and other nations that could use it for purposes that counter US interests.

Under the new approach, the US Commerce Department’s Bureau of Industry and Security could set specific limits on how many AI chips can be exported to individual countries.

This would allow Washington to maintain stricter control over how nations use these technologies, ensuring that AI development aligns with the US’s national security objectives.

The agency has already introduced a framework to ease the licensing process for AI chip shipments to data centers in countries like the United Arab Emirates and Saudi Arabia.

These regulations, introduced last month, are part of an ongoing effort to strike a balance between fostering global AI development and maintaining control over the technology’s distribution.

AI export caps and broader diplomatic goals

Some US officials view semiconductor export licenses, particularly for Nvidia’s chips, as leverage in broader diplomatic efforts.

In addition to containing China’s AI capabilities, the US is considering using export restrictions to encourage key global players to reduce their dependence on Chinese technology.

The discussion comes as countries worldwide pursue “sovereign AI,” aiming to develop their own AI systems independently of foreign technology.

As demand for AI processors surges, Nvidia’s chips have become indispensable for data-center operators, making the company a central player in the global AI market.

However, US officials are wary of how nations might use these powerful chips, particularly in countries with extensive surveillance systems that could use AI to bolster internal control.

Tarun Chhabra, senior director of technology at the US National Security Council, emphasized the need for caution in exporting AI chips, especially to countries with robust internal surveillance apparatus.

The concern is not only about the risks to human rights but also the potential impact on US intelligence operations abroad.

Risks of foreign AI development and global competition

Another concern driving the proposed caps is how global AI development could impact US security.

Although countries like China are working to develop their own advanced semiconductors, their chips still lag behind top American offerings.

However, the US fears that if foreign companies like Huawei eventually catch up, it could weaken America’s influence in shaping the global AI landscape.

Some officials argue that this is a distant concern, suggesting that the US should adopt a more restrictive approach to chip exports while it still holds a competitive advantage.

Others caution that making it too difficult for countries to access US technology could push them to seek alternatives, potentially aiding China’s rise in the sector.

Challenges in enforcing AI chip export restrictions

Implementing country-specific caps on AI chip exports could be a significant challenge for the Biden administration.

Drafting a comprehensive policy, enforcing it, and managing the potential diplomatic fallout would be difficult, especially in the final months of President Biden’s term.

It’s unclear how chipmakers like Nvidia and AMD would react to the proposed rules, as they have significant stakes in global markets.

In 2022, when the Biden administration first issued regulations limiting AI chip exports to China, Nvidia quickly redesigned its offerings to continue selling in the Chinese market.

A similar response could be expected if new country-based caps are introduced.

Despite the ongoing deliberations, the Biden administration has already slowed the approval of high-volume AI chip exports to regions like the Middle East.

However, there are signs that things may change soon.

The new rules for shipments to data centers allow for specific customers to be pre-approved based on security commitments, which could make it easier to issue licenses in the future.

Balancing AI innovation with national security

As AI technologies continue to advance, the US is working to balance fostering innovation and collaboration with the need to protect national security.

The potential caps on AI chip exports reflect growing concerns about how AI could be used in ways that may not align with US interests.

As the global AI race intensifies, it remains to be seen how the US will manage its technological dominance while navigating complex international relationships.

The success of this policy will hinge on its ability to protect US security while still allowing American companies to thrive in a competitive global market.

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Shares of Angel One surged by over 8% to Rs 2,980 on the NSE on Tuesday following the brokerage firm’s announcement of its best-ever quarterly financial performance.

For the quarter ended September 30, 2024, the company posted impressive gains across key financial metrics, highlighting robust growth and consistent market performance.

Best-ever quarterly results boost investor confidence

Angel One’s consolidated net profit for Q2FY25 reached Rs 423 crore, marking a significant 39% increase compared to Rs 304 crore in the same quarter last year.

The company’s total revenue from operations for Q2FY25 stood at Rs 1,515 crore, a 44.5% increase from Rs 1,048 crore in the year-ago period.

Sequentially, the company’s performance also showed notable improvement, with profit after tax (PAT) rising by 45% from Rs 293 crore in Q1FY25.

The total gross revenue for the quarter also reflected positive momentum, reaching Rs 1,516 crore—up 7.5% from the Rs 1,410 crore reported in the previous quarter.

Angel One’s consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) for Q2FY25 came in at Rs 598 crore, representing a 42.5% jump compared to Rs 419 crore in Q1FY25.

The EBITDA margin as a percentage of net income stood at 49.9%, indicating solid profitability.

Strong client base and increased trading activity drive growth

Angel One’s ability to attract and retain clients has been instrumental in its impressive financial performance.

The company added 30 lakh new clients during Q2FY25, reflecting a 15.9% growth on a quarter-on-quarter basis.

This brings its total client base to 27.5 million, an 11.2% increase compared to the previous quarter.

Additionally, Angel One saw its Average Daily Turnover (ADTO) on a notional basis reach Rs 45.4 lakh crore in Q2FY25, a 3.7% rise from Rs 43.8 lakh crore in Q1FY25.

These figures point to an increased volume of trading activity, contributing to the company’s strong quarterly results.

Technical outlook signals further upside potential

Anshul Jain, Head of Research at Lakshmishree Investment & Securities, noted that Angel One’s stock has given a strong bullish breakout from an 86-day cup and handle pattern.

This technical pattern is often seen as a signal of a potential uptrend, and in Angel One’s case, the stock gapped above its breakout level of Rs 2,800, supported by rising trading volumes.

According to Jain, if Angel One can sustain its price above the Rs 2,800 level, the stock could potentially test Rs 3,250 in the near term.

The broader financial sector’s bullish momentum is also providing additional support for Angel One’s stock, making it a key player for traders and investors alike.

Stock performance shows consistent upward trajectory

Angel One’s stock has delivered positive returns across various time frames, underscoring its resilience and appeal to investors. Over the past month, the stock has provided a positive return of 18.45%.

Over the last three months, its performance has been even more notable, with a 27.51% increase.

On a six-month basis, the stock has also demonstrated positive returns, with a gain of 2.43%.

Most impressively, Angel One’s stock has surged by over 41% in the last 12 months, reflecting the company’s strong market position and consistent financial performance.

Outlook and market sentiment

Angel One’s record performance has come at a time when the broader financial sector is showing strong growth, which is adding further momentum to the stock’s upward trajectory.

With a robust client base, increasing daily trading activity, and a favourable technical outlook, the company appears well-positioned to continue its upward climb in the near term.

As the brokerage firm continues to attract more clients and drive higher trading volumes, it is expected that Angel One will maintain its growth trajectory.

Investors are keeping a close watch on how the company’s performance in the coming quarters will align with its recent success.

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The US dollar on Tuesday reached a peak not seen in over two months against several major currencies, driven by increasing speculation that the Federal Reserve will implement moderate rate cuts soon.

Concurrently, the yen inched closer to the critical threshold of 150 per dollar.

In early Asian trading, the euro remained stable but lingered near its lowest point since August 8, which it hit on Monday.

This comes just ahead of the European Central Bank’s policy meeting scheduled for Thursday, where expectations lean toward another interest rate reduction.

Recent US economic indicators suggest resilience, with a modest slowdown observed.

Additionally, inflation for September exceeded predictions slightly, prompting traders to reduce their forecasts for significant rate cuts by the Fed.

The Federal Reserve initiated its easing cycle with an aggressive 50 basis points reduction during its September meeting.

Currently, market expectations suggest an 89% likelihood of a 25 basis points cut in November, with 45 basis points of total easing anticipated for the remainder of the year.

The dollar index, which gauges the currency’s performance against six others, was last recorded at 103.18, just below the 103.36 peak reached on Monday—its highest since August 8.

The index has gained 2.5% and appears poised to end a three-month decline.

A boost for the dollar came after remarks from Fed Governor Christopher Waller on Monday, who urged a cautious approach to future interest rate cuts, referencing the latest economic data.

Waller stated, “Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year.”

Waller also noted that recent hurricanes and a strike at Boeing could complicate job market data, potentially lowering October’s monthly job gains by more than 100,000.

The next non-farm payrolls (NFP) report is scheduled for early November.

Chris Weston, head of research at Pepperstone, remarked:

Most knew that recent disruptions would result in the NFP print being a messy affair, but Waller’s comment goes some way in quantifying the sort of disruption we can expect. Essentially, with the next NFP so distorted, the market won’t have the same level of control in pricing risk into the November FOMC meeting.

The dollar’s recent ascent has negatively impacted the yen, especially following a dovish pivot from Bank of Japan Governor Kazuo Ueda and unexpected resistance to further rate hikes from new Prime Minister Shigeru Ishiba.

These developments have raised questions about the timing of future policy tightening by Japan’s central bank.

In early trading, the yen was valued at 149.55 per dollar, having reached a 2.5-month high of 149.98 on Monday, a day when Japan was closed for a holiday.

The last instance of the yen hitting the 150 level was on August 1.

The Australian dollar remained steady at $0.67275, while the New Zealand dollar dipped 0.13% to $0.6089. The euro was last quoted at $1.090825.

Meanwhile, the offshore yuan in China showed little movement at 7.0935 per dollar, following a report by Caixin Global indicating that China might issue an additional 6 trillion yuan (approximately $850 billion) in Treasury bonds over the next three years to stimulate its sluggish economy.

Tony Sycamore, a market analyst at IG, noted that market sentiment is shifting toward the expectation of fresh stimulus measures, potentially to be discussed at the China National People’s Congress standing committee meeting later this month.

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Investors are currently focused on defensive trades, missing out on the strength of the economy, according to a report from Morgan Stanley.

The firm has identified significant opportunities in underappreciated sectors, particularly within financial stocks.

Recently, Morgan Stanley upgraded cyclical stocks to an “overweight” position compared to defensive sectors.

The report emphasizes that net exposure to financials is alarmingly low, residing in the bottom 15th percentile of historical data dating back to 2010.

As illustrated in accompanying charts, the financial sector is the least owned compared to others.

Mike Wilson, the bank’s chief investment officer and head of US equity strategy, pointed out several factors that could positively impact financial stocks.

He stated:

In our view, this creates opportunity in [the financial] sector that we upgraded to overweight last week given: rebounding capital markets activity, a better loan growth environment in 2025, an acceleration in buybacks post Basel Endgame re-proposal, and attractive relative valuation.

Bank stocks have become increasingly appealing due to improved valuations following a de-risking phase last month, during which large-cap dealers expressed caution about their operating conditions.

This caution has led to lowered expectations for earnings season, allowing major lenders to surpass forecasts more easily.

Following the release of better-than-expected earnings reports last week, both JPMorgan and Wells Fargo have seen notable increases in their stock prices, rising by 3.8% and 8.8%, respectively, since Friday’s market open.

Despite these developments, Wilson observed a continued lack of market interest in financial stocks.

This trend extends beyond banking; investors are largely shunning other cyclical sectors, opting instead for defensive and quality stocks.

Utilities, healthcare, and real estate, which are considered defensive plays, account for some of the highest net exposure in investor portfolios.

Wilson contended that this positioning indicates investors are preparing for a soft-growth scenario, which seems increasingly unlikely based on recent macroeconomic trends.

Although Morgan Stanley had previously shifted to a neutral stance on cyclicals versus defensives at the end of last month, the firm upgraded cyclicals to an overweight position last week after the jobs report exceeded Wall Street expectations.

“As several key macro data points have come in better than expected (namely the jobs report and the ISM Services Index) following the Fed’s 50bp rate cut, cyclicals have begun to show relative strength,” Wilson noted.

Additionally, rising yields in the rates market suggest diminishing growth concerns.

The report indicates that cyclical sectors such as industrials, financials, and energy typically perform better when yields increase, while defensive stocks tend to decline in response to rising rates.

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EasyJet (EZJ) share price has crawled back this month after going through substantial turbulence between April and August 10, when it slumped by over 31%. It has rebounded by 26% and was trading at 513p as most airline stocks recovered. 

Low-cost airlines are struggling

EasyJet, like other low-cost airline companies, has faced heightened scrutiny in the past few months.

In the United States, Spirit Airlines is on its deathbed, while other low-cost companies like Jetblue, Southwest, and Frontier are struggling. 

Similarly, Ryanair, the biggest airline in Europe, has also slumped by more than 25% from its highest level this year.

These companies are facing numerous challenges. Those using Boeng 737 Max have had to go through a major crisis. Boeing has been forced to reduce its production and ground most of the 737 lineup in the past few months.

Similarly, airlines using some Airbus planes, including EasyJet have faced Pratt & Whitney engine issues. 

Regional airlines are also seeing more competition in the aviation industry. For example, Saudi Arabia has launched Riyadh Air, a new airline that will start flying passengers in 2025. 

Many large airlines have also expanded their businesses to the low-cost segment, leading to more competition.

Additionally, there are worries that the industry will start slowing down as the concept of revenge travel fades.

Easyjet is doing well

EasyJet, one of the biggest European airlines is doing modestly well despite the recent challenges. 

In July, the company said that its passenger growth in the third quarter rose by 8%, leading to an 11% increase in its group revenue to £2.3 billion. 

Most of this revenue growth came from its ancillary segment, whose figure rose by 11% to £693 million. Also, its smaller holidays; revenue rose by 42% to over £336 million.

For starters, EasyJet makes money in three main ways. First, it makes revenue when people book and pay for their flights. Second, its ancillary revenue comes from the additional and voluntary fees that people pay for like bags and drinks. Third, EasyJet Holidays is a service where it offers packaged holiday solutions. 

EasyJet’s EBITDAR rose by 14% to £423 million, while its profit before tax (PBT) rose by 16% to over £236 million. 

This growth happened as the company continued growing its flights. It had over 49k flights in April followed by 54k and 53k in the next two months. As a result, its quarterly flights jumped to 156,487 from 146,816 in the same quarter in 2023.

Other metrics show that EasyJet’s business was doing well as the load factor rose to 90%, while the number of seats flown in the quarter rose to over 28 million.

EasyJet has solid fundamentals

The company has some of the best fundamentals in the European aviation industry. First, EasyJet is focused on the leisure industry, which explains why its holiday business is doing well. By having its own airline, it means that it can offer fairly cheaper packages than other large players in the industry. 

Second, the company has a fairly young fleet of aircraft, making it more attractive to many customers. Its average fleet age is 9.9 years and has ordered over 300 planes from Airbus.

Third, EasyJet’s strategy ensures that it has lower operational costs compared to other large airlines. In most cases, its Cost per Available Seat Kilometer is significantly smaller than that of British Airways, Lufthansa, and KLM. 

Most importantly, the company has ambitious targets of delivering £1 billion in pre-tax profit in the next few years. It also has one of the best balance sheets in the European aviation market.

The next key catalyst for EasyJet share price will be its full-year earnings scheduled on November 27.

EasyJet share price analysis

The daily chart shows that the EZJ stock price has done well in the past few weeks. It has soared from the August low of 404.7 to 525p.

The stock has moved above the 50-day and 200-day Exponential Moving Averages (EMA), and the 38.2% Fibonacci Retracement point. 

It recently formed a golden cross pattern as the 50-day and 200-day EMAs crossed each other. Therefore, the stock will likely continue rising as bulls target the year-to-date high of 592.2p, its highest point in April. This price implies a 12.70% jump from the current level.

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