CONSUMER WATCH

Consumer momentum continued in December after a chilly November

In December, total credit and debit card spending per household increased 1.8% year-over-year (YoY), up from 1.3% YoY in November, according to Bank of America aggregated card data.

Meanwhile, seasonally-adjusted (SA) spending growth per household rose 0.5% month-over-month (MoM), following the flat reading in November. Looking across 2025, consumers ended on solid footing despite some slippage in the first half of the year.

Spending behavior showed a distinctly “K-shaped” pattern in the second half of 2025. This continued into December, with lower-income households increasing their three-month average card spending just 0.4% YoY, while those with higher incomes saw a 2.4% gain. While the gap remains around 2 percentage points (pp), it has been relatively stable over the past six months. (…)

Higher tax refunds in 2026 are likely to provide an important boost, temporarily bolstering discretionary spending growth, in our view. The One Big Beautiful Bill Act (OBBBA) included several tax benefits that should drive larger refunds this year (as will the fact that the Internal Revenue Service (IRS) did not adjust withholdings last year). These changes included an increase in the standard deduction, new deductions for tip and overtime income, and a rise in the state and local tax (SALT) deduction cap.

BofA Global Research estimates that refunds in 2026 could be about $65bn higher than 2025, a rise of 18%. The majority of these payments will be made between February and April.

While higher earners may possibly get the biggest boost, lower-income households won’t be left out entirely.

Some lower- and middle-income households should gain, given they are more likely to work in sectors such as leisure and hospitality, in which tips and overtime can drive earnings. But, at the same time, the changes to SALT, which increased the cap on state and local tax deductions, will likely benefit higher-income households.

In fact, the non-partisan Tax Policy Center has estimated that the largest impact on cash income in 2026 from the OBBBA will likely benefit people with the highest incomes.

However, importantly, while the largest absolute benefits from OBBBA in 2026 are expected to accrue to higher-income households, the proportional impact on spending may still be greater for lower-income households.

In Bank of America internal deposit data, we find that refunds as a share of average monthly spending are significantly larger for lower-income households than for middle- or higher-income households. So even if the growth in refunds was fairly uniform across the income distribution, as it was in 2025, it could still boost lower- income household spending – and take some pressure off their discretionary “nice-to-have” spending budgets.

US Productivity Accelerates to Fastest Pace in Two Years

US labor productivity accelerated in the third quarter to the strongest pace in two years, adding to evidence that efficiency gains are suppressing inflationary pressures from wages.

Productivity, or nonfarm employee output per hour, soared at a 4.9% annualized rate after an upwardly revised 4.1% advance in the second quarter, data from the Bureau of Labor Statistics showed Thursday.

US economic growth powered ahead in the third quarter at the fastest pace since 2023, despite a slowing labor market. Unit labor costs — what businesses pay employees to produce one unit of output — dropped 1.9%, following a decrease in the prior quarter. That marked the first back-to-back declines since 2019. (…)

Federal Reserve officials can take comfort in continued efficiency gains because they limit wage-driven inflationary pressures. Labor costs are the biggest expense for many businesses, so companies turn to new technology and equipment to improve worker efficiency. (…)

In addition to helping contain labor costs, the resurgence in productivity in mid-2025 suggests companies are attempting to mitigate the impact of higher duties on imported goods. It also highlights how companies can use technology to get by with lean staffing. (…)

The productivity report showed output in the third quarter increased an annualized 5.4% after advancing at a 5.2% rate in the prior three months.

Hours worked rose 0.5% in the third quarter, while hourly compensation, unadjusted for inflation, increased an annualized 2.9%. After adjusting for inflation, worker compensation declined at a 0.2% pace.

From Ed Yardeni:

Wells Fargo:

The solid outturn reinforces that the underlying trend in productivity remains stronger than the prior cycle (2.0% since the end of 2019 versus 1.5% from 2007-2019) and should help to allay concerns over the current state of inflation.

Retail Crowd’s Buying Power Signals More Gains for US Stocks

Retail traders have extended a buying spree into the new year, following a record-setting performance in 2025, an analysis from JPMorgan Securities’ Arun Jain shows. Purchases in the first four trading days of January hit the second-highest level in almost eight months, the firm’s data showed, while daily buying was consistently above the 85th percentile of observations, underscoring unusually strong conviction.

That confidence has helped stabilize markets during recent pullbacks. Considering the group’s growing influence on Wall Street, if retail traders keep snapping up equities, gains in the US stock market are likely to persist.

“Markets have been seemingly more driven by flows of funds than valuations, so — as long as individual investors are willing and able to commit money to stocks — that’s a positive sign for broad markets,” said Steve Sosnick, chief strategist at Interactive Brokers.

So far, the signal is flashing green. Since the start of the year, retail investors have bought about $10.1 billion of US equities — mainly via exchange-traded funds — far exceeding the 12-month weekly average of roughly $6.5 billion, JPMorgan data showed.

Retail inflows in 2025 were nearly double the five-year average, surpassing the prior record set in 2021 by 17% and exceeding 2024 levels by almost 60%, the bank’s data show. December alone marked the largest monthly buying spree since the post–Liberation Day buy-the-dip episode in April. (…)

Single-stock trading cooled starting in May, but ETF buying continued apace, helping to keep overall equity demand elevated.

One in two US households own stocks and the percentage of households’ net worth tied to the stock market is over 30%, marking an all-time high, according to Barclays’ global head of equities tactical strategies Alexander Altmann. Citadel Securities said individual investors now account for 21% of trading volume in US stocks and roughly 60% of customer volume at Options Clearing Corp., the biggest equity derivatives clearing organization. (…)

“The buy-the-dip strategy has worked extraordinarily well for a wide swath of investors for a long period of time,” Sosnick said. “It’s reasonable to expect that it will remain a popular strategy until it stops working, as all ‘foolproof’ strategies eventually do.”

One notable shift was into precious metals. Retail investors bought more shares of SPDR Gold Shares ETF (GLD) in 2025 than in the prior five years combined, JPMorgan’s Jain wrote. The fund climbed about 64% in 2025, fueled by rising gold prices and heavy central-bank buying as heightened geopolitical risks stoked investor demand.

Retail enthusiasm has also spilled over into derivatives. Options activity rebounded sharply after a holiday pause, with individual investors buying call options in 35 of the past 36 weeks, according to Scott Rubner, Citadel Securities’ head of equity and equity derivatives strategy.

“The defining feature of retail activity in 2025 was persistent bullishness and after earning more than $20 billion in options on our platform over the course of the year, retail investors enter January armed with capital to deploy,” Rubner wrote in a note to clients Tuesday.

Citadel Securities expects that dynamic to continue this year, particularly in buzzy retail themes like quantum computing, robotics and automation, as well as space travel.

It’s fitting here to reprint part of Richard Bernstein’s 2026: Boring is beautiful:

2025 was a historic year for speculation across the financial markets. The economy is healthy, and the banking system is functioning well, so the Fed’s rate cuts and the anticipation of future rate cuts have resulted in excess liquidity that the economy simply can’t absorb, and excess liquidity and leverage form the life blood of speculation.

Whether it was the equity market’s emphasis of AI, SPACs, and Meme stocks, the fixed-income market’s near-record narrow credit spreads, individual investors’ record use of options and levered ETFs, or the hoarding of cryptocurrencies, speculation was rampant in 2025. (…)

When sports betting is considered a new asset class, as it apparently is today, it’s easy to argue that speculation is dominating investors’ thoughts. Historically, it’s been prudent to keep portfolios simple and boring as speculation reaches a crescendo because boring suddenly becomes beautiful when speculation subsides.

• US investors’ equity allocation is at an all-time high GS

@MikeZaccardi

AI CORNER

DeepSeek’s AI gains traction in developing nations, Microsoft report says

DeepSeek, the Chinese tech startup that rivals OpenAI‘s ChatGPT, has been gaining ground in many developing nations in a trend that could narrow the gap of artificial intelligence adoption with advanced economies, a new report suggested.

In the Thursday report, researchers from Microsoft said global adoption of generative AI tools reached 16.3% of the world’s population in the three months to December, up from 15.1% in the previous three months.

Yet the divide of AI adoption in developed and developing countries is widening, the report noted, with AI adoption across what Microsoft characterizes as the global north growing nearly twice as fast as in the global south. (…)

Countries that invested early and consistently in digital infrastructure and AI led in terms of shares of users, including the United Arab Emirates, Singapore, France and Spain, according to the report. Some of Microsoft’s figures overlapped with the findings of a Pew Research Center survey published in October that mapped which countries are more excited than concerned about AI. In both reports, for instance, South Korea stood out in its embrace of AI. (…)

His researchers found that the rise of Chinese startup DeepSeek, which was founded in 2023, has fueled wider AI adoption across the developing world given its free and “open source” models – with key components available for anyone to access and modify. (…)

DeepSeek offers a free‑to‑use chatbot on web and mobile, and has also given developers global access to modify and build on its core engine. Its lack of subscription fees has “lowered the barrier for millions of users, especially in price‑sensitive regions,” Microsoft’s report said.

“This combination of openness and affordability allowed DeepSeek to gain traction in markets underserved by Western AI platforms,” the report added. “DeepSeek’s rise shows that global AI adoption is shaped as much by access and availability as by model quality.”

Developed countries including Australia, Germany and the U.S. have sought to limit the use of DeepSeek over alleged security risks. Microsoft last year banned its own employees from using DeepSeek. Adoption of DeepSeek remained low in North America and Europe, the report found, but it surged in its home country China, as well as Russia, Iran, Cuba, Belarus – places where U.S. services face restrictions or where foreign tech access is limited.

In many places, DeepSeek’s prevalence correlated with it being a default chatbot on widely available phones made by Chinese tech companies like Huawei.

DeepSeek’s market share in China was 89%, the report estimated. That’s followed by Belarus’s 56% and Cuba’s 49%, both of which also had low AI adoption more broadly. In Russia, its market share was around 43%.

In Syria and Iran, DeepSeek’s market share reached around 23% and 25%, respectively, the report added. In many African countries including Ethiopia, Zimbabwe, Uganda and Niger, DeepSeek’s market share was between 11% to 14%.

“Open‑source AI can function as a geopolitical instrument, extending Chinese influence in areas where Western platforms cannot easily operate,” the report said.

Politics aside, the Microsoft report has other important info:

• Global adoption of artificial intelligence continued to rise in the second half of 2025, increasing by 1.2 percentage points [to 16.3%] compared to the first half of the year, with roughly one in six people worldwide now using generative AI tools, remarkable progress for a technology that only recently entered mainstream use. 
• Despite progress in AI adoption, the data shows a widening divide: adoption in the Global North grew nearly twice as fast as in the Global South. As a result, 24.7 percent of the working age population in the Global North is now using these tools, compared to only 14.1 percent in the Global South. 

• Countries that have invested early in digital infrastructure, AI skilling, and government adoption, such as the United Arab Emirates, Singapore, Norway, Ireland, France, and Spain, continue to lead.
• The second half of the year in the United States shows that leadership in innovation and infrastructure, while critical, does not by themselves lead to broad AI adoption. The U.S. leads in both AI infrastructure and frontier model development, but it fell from 23rd to 24th place in AI usage among the working age population, with a 28.3 percent usage rate. It lags far behind smaller, more highly digitized and AI-focused economies.
• South Korea stands out as the clearest end-of-year success story. It surged seven spots in the global rankings, climbing from 25th to 18th, driven by government policies, improved frontier model capabilities in the Korean language, and consumer-facing features that resonated with the population. Generative AI is now used in schools, workplaces, and public services, and South Korea has become one of ChatGPT’s fastest-growing markets, leading OpenAI to open an office in Seoul.

• The United States maintained strong usage in absolute numbers [28.3%], but dropped from 23rd to 24th place, reflecting the fact that a smaller proportion of the US population uses AI compared to several smaller highly digitized nations.

AI Diffusion Over Time by Country

• DeepSeek has clearly lowered entry barriers for millions, suggesting that the next billion AI users may emerge not from traditional tech hubs but from the Global South, enabled by open-source innovation.

A fantasy M&A guide to buying Greenland The process might be thought of as analogous to one company buying another

Buying and selling countries sounds like the kind of thing that would only happen in a board game. Yet US President Donald Trump is considering making a bid for Greenland, the White House confirmed on Wednesday.

Imagine, for a moment, that the US does indeed think it can acquire Greenland from current owner Denmark in some kind of commercial transaction. The process might then be thought of as analogous to one company buying another. In this case, it would be an unsolicited bid, perhaps like the one Paramount Skydance has made to derail Netflix’s acquisition of media outfit Warner Bros Discovery.

The first question is what Greenland is worth. Finance students will recall two ways to approach that in an M&A scenario.

One is “intrinsic valuation”. The American Action Forum, a think-tank, totted up Greenland’s barely tapped mineral reserves at market prices, applied a probability weighting of sorts, and arrived at $186bn. Double that to factor in the value of owning a region critical in a theoretical war with Russia, and call it $370bn.

Alternatively there’s “relative valuation”, which calls upon similar past transactions. Using the same price per square mile as 1803’s Louisiana Purchase, and converting it into today’s money based on historic inflation rates, the price is a measly $300mn. But use instead the 1917 purchase of the comparatively tiny Virgin Islands, also formerly Danish, and that rises to a heady $3.8tn.

In this case, what matters isn’t valuation maths but effective negotiation — the other element of M&A. What does it take to get enough of the right people to agree to a change of control?

Since Denmark says Greenland has the right to declare full independence, there’s a theoretical path for its 57,000 residents to voluntarily embark on a process, no doubt a convoluted one, of swapping Danish rule for American stewardship. Seen in this light, buying Greenland would actually be quite a lot like buying a company: convince enough shareholders to back your offer, and the prize is yours.

The US could offer each resident US citizenship and a welcome bonus of $1mn, and the total cost would be some $57bn, increasing the US national debt by just 0.1 per cent. Elon Musk, who has expressed support for a union, could even throw in free Teslas for all.

The catch is that a US-Greenland merger is actually less like a straight takeover and more like a cash and stock deal, where the “stock” involves becoming American. Just as in an M&A battle — think of Netflix offering a slug of stock to WBD — the question is not just about the sums on offer but the attractiveness of the acquirer’s shares.

There, Trump has a problem. The US is rich and mighty. But as role models go, it is a flawed one, with lower life expectancy than peers, healthcare twice as expensive as Denmark’s, and a gun homicide rate 65 times higher.

A poll by Verian found 85 per cent of Greenlanders would rather not turn American. Besides, the US is run by a government that thinks countries can be traded like companies. That alone makes it a tough sell.

Not so crazy scenario per Reuters:

Trump considers paying “Greenlanders” $10,000 – $100,000 per person to join the U.S. and support secession from Denmark — Reuters

Sounds like a low bid.

The irony is Trump being even interested in buying anything with “green” in it…

US Job Openings Decline to Lowest Level in More Than a Year

The number of available positions decreased to 7.15 million in November from a downwardly revised 7.45 million in the prior month, Bureau of Labor Statistics data showed Wednesday. The figure was below all estimates in a Bloomberg survey of economists.

The pullback in openings reflected fewer opportunities in leisure and hospitality, health care and social assistance, as well as transportation and warehousing. The number of hires declined to the lowest since mid-2024, while layoffs also eased.

The decline in vacancies along with a slowdown in hiring reinforces views that the job market continues to soften, though companies are largely refraining from dismissing workers outright. (…)

The JOLTS report showed the number of vacancies per unemployed worker, a ratio Fed officials watch closely as a proxy of the balance between labor demand and supply, fell to 0.9 — the lowest since March 2021. At its peak in 2022, the ratio was 2 to 1.

(Ed Yardeni)

Some economists have questioned the validity of the JOLTS data, in part due to the survey’s low response rate and sometimes sizable revisions. A separate index by job-posting site Indeed, which is reported on a daily basis, showed openings rebounded in November after reaching a multiyear low.

• US Layoff Plans Dropped at Year End With More Hiring to Come

Companies announced 35,553 job cuts in December, the lowest since July 2024 and down substantially from elevated readings in the prior two months, according to data from outplacement firm Challenger, Gray & Christmas Inc. Additionally, employers laid out plans to add nearly 10,500 jobs, the highest for any December since 2022. The data was released ahead of schedule after it became accessible on the Challenger website.

While December is typically a month with fewer layoff plans, the drop in job-cut announcements, plus greater hiring intentions, “is a positive sign after a year of high job cutting plans,” said Andy Challenger, the firm’s chief revenue officer.

The figures signal some momentum for the labor market heading into the new year after a notable slowdown in 2025. Planned layoffs topped 1.2 million last year, the most since 2020 and led by the federal government. In the private sector, technology, warehousing and retail also saw pickups from 2024. (…)

• As the year closed, hiring growth recovered

What was the state of the labor market as 2025 came to an end? While Bank of America internal data suggests payroll growth slowed last year, the “good news” is our data suggests some recovery in December. We also see no sign of an acceleration in the rise in unemployment payments into Bank of America customer accounts.

So overall, while the story as the year closed remained one of “low-hire, low-fire,” it appears possible that most of the labor market slowdown may have run its course.

We use Bank of America internal deposit data to estimate a payrolls series by looking at how the number of customer accounts receiving a paycheck is changing. This data can be fairly noisy, partly due to seasonal variation. However, looking at a three-month moving average, Exhibit 1 suggests that the year-over-year (YoY) growth in our measure rose to 0.6% in December, a rebound from 0.2% YoY in November. This December YoY growth is also similar to that seen in the Bureau of Labor Statistics’ (BLS) estimate of payrolls for November, which adds to the impression the slowdown in jobs growth may be over.

We also do not see signs of an acceleration in the rise in unemployment payments into Bank of America customer accounts. Exhibit 2 shows that in December, growth in unemployment payments into Bank of America customer accounts held steady at around 10% YoY, consistent with the rate of growth observed from September through November.

In September, the YoY increase in the level of unemployment was +10.2%.

• New orders for U.S. manufactured goods fell 1.3% in Oct 2025, ending 2 months of gains.

@Econoday

Someone has a plan!

Trump Team Works Up Sweeping Plan to Control Venezuelan Oil for Years to Come President believes the effort could lower oil prices to his target of $50 a barrel

A plan under consideration envisions the U.S. exerting some control over Venezuela’s state-run oil company Petróleos de Venezuela SA, or PdVSA, including acquiring and marketing the bulk of the company’s oil production, people familiar with the matter said.

If successful, the plan could effectively give the U.S. stewardship of most of the oil reserves in the Western Hemisphere, when factoring in deposits in the U.S. and other countries where U.S. companies control production. It could also fulfill two of the administrations’ primary goals: to box Russia and China out of Venezuela and to push energy prices lower for U.S. consumers.

Trump has repeatedly raised the prospect of lowering oil prices to $50 a barrel, his preferred level, two senior administration officials said. (…)

Many companies see $50 a barrel as a threshold below which it becomes unprofitable to drill, and a sustained period of low oil prices could decimate the U.S. shale industry, which has been a key backer of the president. (…)

Energy Secretary Chris Wright said at a Goldman Sachs investor conference in Miami that the U.S. will sell blockaded Venezuelan oil “indefinitely.”

“We’re going to market the crude coming out of Venezuela—first this backed up, stored oil, and then indefinitely, going forward, we will sell the production that comes out of Venezuela into the marketplace,” Wright said at the conference. (…)

The administration’s actions amount to an expansion of its “drill, baby, drill” mantra well beyond U.S. borders. Trump has long viewed increased production and lower oil prices as an economic boon and has made that a priority throughout his second term. The initiative has taken on more urgency as voters continue to express anxieties about affordability and Trump’s polling numbers decline ahead of pivotal midterm elections. (…)

The WSJ Editorial Board:

(…) Mr. Trump’s incessant talk about monetizing Venezuela’s oil plays into the hands of critics who say it’s all about oil. The President in recent days has suggested subsidizing American oil companies to return to Venezuela, as if it’s an imperial American outpost from a century ago.

His plan to sell Venezuelan oil raises more questions. The government “will be turning over between 30 and 50 MILLION Barrels” for the U.S. to sell, and “that money will be controlled by me, as President of the United States of America, to ensure it is used to benefit the people of Venezuela and the United States!” he wrote on Truth Social.

Selling sanctioned oil could do some good if the proceeds are given to the opposition or put in an escrow account for rebuilding Venezuela’s economy, when and if the regime relinquishes power. But Mr. Trump seems to view the oil proceeds as a personal executive account, beyond the control of Congress’s purse-strings, to dole out as he sees fit.

It elides U.S. national security interests with Mr. Trump’s personal power, much like his gambit to let TikTok keep operating in the U.S. in violation of the law on the condition that the Treasury get a cut of its eventual sale to American investors. To the victor go the oil spoils won’t improve U.S. standing in the world, and it sends a bad message to the world’s rogues about the way to buy U.S. support. This will be reinforced if the oil donation helps the Caracas regime stay in power. (…)

The FT’s Alan Beattie:

(…) Now, the limited amount of oil that the US can take from Venezuela in the medium term — its deposits are famously hard to extract — is unlikely to have a serious economic impact. But Trump’s quasi-imperial ambition to establish a sphere of influence in the Western Hemisphere will not make America great again. The key to greater US prosperity is competing in new technologies and addressing the problems in its domestic economy, not looting its neighbours for hydrocarbons it already has. 

In that respect, the Venezuela gambit is an intervention from a lost age before the shale gas revolution, when the US was not just a net importer of energy but oriented much of its foreign policy around keeping the hydrocarbons flowing. (…)

In trying to press US oil companies into investment and production in Venezuela, Trump is treating them like the state-owned companies typical of oil-dependent countries elsewhere, used as geopolitical and fiscal tools.

To what economic end? At the margin, even assuming the efficiency of production increases to bring the current cost of extraction in Venezuela down from around $80 a barrel, well above the current world price, its oil will displace the US shale, which genuinely does deliver American energy dominance. It will also make US energy supply subject to the vagaries of Latin American politics. 

Trump’s broader aims, as suggested in December’s national security strategy, are to use coercion to secure the supply of commodities for America. But not only does the US have the misfortune to be in a not particularly ideal neighbourhood in that regard, making the country’s economy safe and prosperous will require improved technology more than the minerals delivered by quasi-imperial satraps. (…)

It’s not a lack of basic commodities that’s holding back the US economy. America is falling behind China in innovation in productivity-enhancing technologies such as batteries, robotics and renewable energy — though to be fair, the sometimes reprehensible services offered by its tech sector remain world-beating. Trump’s growth strategy appears to rely on an AI sector that looks exceedingly like a bubble, fossil fuels with which the world is currently amply supplied and a pointless attempt to reshore basic manufacturing through tariffs. (…)

In one area where America has maintained a lead — semiconductor research and development — Trump is allowing companies to help China keep up, for example by permitting Nvidia to export high-end chips there. If China is emboldened even at the margin by Trump’s Venezuela misadventure to seize Taiwan, it will take control of a huge swath of the world’s chip research and production capacity. As imperial plunder goes, an unassailable position in the technology that networks the world economy is worth more than some sticky oil deposits hundreds of metres underground.

One of the reasons that the Spanish empire imploded so quickly, certainly compared with its British counterpart, is that it was run by a corrupt, self-enriching aristocratic elite more concerned with grabbing wealth and power than in developing technologies and building trade routes.

Trumpists may pride themselves on acting decisively in US interests — international law and foreign policy alliances be damned — but building a sphere of geopolitical influence that delivers no discernible economic gains is emphatically not the way to do it.

• Trump cuts to academia risk ceding AI lead, warns Microsoft scientist

Microsoft’s chief scientist has warned that cuts to US federal funding for academic research will drive talent and ideas abroad, giving international rivals a lead in the artificial intelligence race.

Eric Horvitz told the Financial Times that President Donald Trump’s decision to slash academic research funding could give other nations, such as China, an edge in science and technological innovation.

“I personally find it hard to see the logic of trying to compete with competitor nations at the same time as making these cuts,” Horvitz said.

The intervention comes as US universities and federal agencies have been hit by billions of dollars in funding reductions since Trump took office last year. Those moves have been justified as cost-cutting measures or by ideological stances, such as blocking grants for diversity initiatives.

While prominent scientists and academics have criticised the Trump administration’s policies, Horvitz is a rare senior corporate executive to have taken a public stance on the matter. (…)

“By betting on intellect and ideas, we can make the world better in surprising ways,” he added. Trump has scrapped more than 1,600 NSF grants, worth nearly $1bn in funding, since 2025. (…)

Funding cuts and freezes have forced academic institutions to overhaul their governance and finances, while prompting some academics and students to move abroad. (…)

• China to Approve Nvidia H200 Buying as Soon as This Quarter

Chinese officials are preparing to allow local companies to buy the component from Nvidia for select commercial use, said the people, who asked not to be identified because the deliberations are private.

However, the H200 chip will be barred from the military, sensitive government agencies, critical infrastructure and state-owned enterprises due to security concerns, they said. That mirrors similar measures that the Chinese government adopted for foreign products such as Apple Inc. devices and Micron Technology Inc. chips. (…)

Alibaba Group Holding Ltd. and ByteDance Ltd. have both told Nvidia in private that they are interested in ordering more than 200,000 units each of the H200, according to a person familiar with the matter. Both companies — alongside prominent Chinese startups, including DeepSeek — are rapidly upgrading their models to compete with OpenAI and other US rivals. (…)

Meanwhile, Nvidia’s rivals in China are making inroads. Huawei and manufacturing partner Semiconductor Manufacturing International Corp. have improved their chip production technology, despite US attempts to limit their progress. The Kirin 9030 processor — part of Huawei’s latest flagship Mate 80 Pro Max smartphone — was produced using an evolved version of SMIC’s technology, research firm TechInsights has found.

Huawei’s smaller peer Cambricon is also planning to more than triple its production of AI chips in 2026, aiming to expand its market share in China and fill a void left by Nvidia.

Still, Nvidia’s AI accelerators are considered the gold standard for the AI industry, and some of the company’s older products are still more powerful than Huawei’s latest offerings — especially on a chip-by-chip basis.

Trump Orders Crackdown on Defense Industry Stock Buybacks President threatens to punish RTX, accuses it of not investing enough in infrastructure.

President Trump lashed out at U.S. weapons manufacturers Wednesday, announcing new restrictions on executive pay and stock buybacks while also threatening to cancel contracts with one of the country’s largest defense contractors.

An executive order posted Wednesday evening said companies “are not permitted in any way, shape, or form to pay dividends or buy back stock, until such time as they are able to produce a superior product, on time and on budget.”

Earlier Wednesday, Trump said in a Truth Social post that he would limit executive pay to $5 million, but the dollar figure wasn’t included in the executive order. It wasn’t clear how the administration intended to carry out the order beyond using the enforcement tools already available to Pentagon officials.

Trump also singled out contractor RTX in a separate social-media post, saying that the company “has been the least responsive” to the Pentagon’s needs and “the slowest in increasing their volume, and the most aggressive spending on their Shareholders rather than the needs and demands” of the U.S. military.

Either the company “steps up and starts investing in more upfront Investment like Plants and Equipment, or they will no longer be doing business with” the Pentagon, Trump added. (…)

Saying that he was addressing defense contractors and the defense industry, Trump wrote, that “…Defense Contractors are currently issuing massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment. This situation will no longer be allowed or tolerated!”

The post didn’t specify whether the order would curb CEO salaries, which are usually less than $5 million a year, or full compensation packages with stock options and bonuses often worth eight figures.

Defense stocks fell following Trump’s afternoon Truth Social post. RTX shares dropped more than 2% during the Wednesday trading session, while shares in Northrop Grumman, Lockheed Martin and General Dynamics all fell 4% or more Wednesday. The companies’ shares rallied after hours, however, following another Truth Social post calling for a $1.5 trillion defense budget, more than $500 billion more than the Pentagon is expected to receive in the fiscal 2026 budget. (…)

Trump’s posts raised questions about legality of the restrictions on stock purchases and executive compensation, and how the government would enforce them.

“The executive order would affect the fundamental business models of U.S. defense contractors,” said Jamie Gorelick, a former deputy attorney general and Defense Department general counsel during the Clinton administration who is now a partner at WilmerHale.

The executive order “would also raise significant legal issues,” Gorelick said. “It’s extremely difficult to imagine a defense contractor raising any capital, or indeed having any shareholders if you cannot compensate the shareholders for their investments.” (…)

Some defense contractors have recently taken steps to shore up the administration’s support. Lockheed Martin said Tuesday it had struck a deal with the Pentagon to potentially more than triple production of Patriot missile interceptors to about 2,000 missiles a year. Under the agreement, Lockheed agreed to pay to expand its Patriot missile factory in return for Pentagon orders over a seven-year period.

“We will be aggressively exploring other opportunities to make sure that we can stretch every acquisition dollar to the benefit of the war fighter and the taxpayer,” Michael Duffey, the undersecretary of defense for acquisition and sustainment, said Tuesday on a call announcing the Patriot deal with Lockheed. (…)

Data: Department of Defense, Axios research. Chart: Erin Davis/Axios Visuals

• Trump Moves to Ban Big Investors From Buying Single-Family Homes

President Trump said he will ban large investors from buying single-family homes, the administration’s first significant move to address the country’s severe housing shortage.

“I am immediately taking steps to ban large institutional investors from buying more single-family homes, and I will be calling on Congress to codify it. People live in homes, not corporations,” Trump said in a social-media post Wednesday.

It isn’t clear if Trump can carry out such a ban without congressional approval, and big investors would still be able to hold on to their hundreds of thousands of existing homes. Yet if the president is able to enact a ban, it would likely ripple through a number of major housing markets across the country.

Wall Street’s presence in the housing market began growing after the subprime mortgage crisis started to erupt in 2007, even though institutional investors have never owned more than a tiny slice of the overall housing market. Some estimates put the figure around 2% to 3%.

But in several cities, investors hold a significant share of homes. During the pandemic housing boom, investors accounted for more than 20% of all home sales in some hot markets, including Houston, Miami, Phoenix and Las Vegas.

Sunbelt cities have been a particular target for institutional homeownership. A 2024 analysis by the Government Accountability Office said large institutions owned 25% of rental homes in Atlanta and 18% in Charlotte.

Investors of all sizes, including mom-and-pop landlords, spent billions of dollars buying homes over the past dozen years. At the 2022 peak, they purchased more than one in every four single-family homes sold. Most of these purchases were made by small investors looking to rent out properties. Investor purchases, alongside those made by traditional buyers, slowed when mortgage rates surged.

Single-family rental companies that buy up homes say they offer their residents an opportunity to live in upscale neighborhoods with good school districts that they wouldn’t be able to afford to own.

But growing voter anger over high homeownership costs has led government officials from both parties to try to crack down on institutional investors in their local markets. Nebraska, California, New York, Minnesota and North Carolina are among the states where lawmakers have proposed laws to restrict large investor home purchases, though most haven’t gone anywhere. (…)

Home building slowed considerably after the 2008-09 financial crisis caused home prices to plummet. That left many builders stuck with an excess of inventory. Wall Street firms, private-equity managers and other institutional investors bought tens of thousands of single-family homes, often in bulk at foreclosure auctions.

Trump would be hard-pressed to implement a legal ban without getting congressional approval. ​​A bipartisan Senate bill last year that aimed to increase housing supply by streamlining certain federal programs and improving access to affordable mortgages passed the Senate unanimously. But it was blocked by House Republicans.

Democrats said they support limiting institutional investors from buying up homes, but objected to how Trump was going about it, and noted that Republicans have blocked similar attempts in the past. (…)

Corporations that invest in single-family homes would have several ways to argue that a ban is a violation of their constitutional rights, according to the American Bar Association.

“The pushback won’t just be from our industry,” said Sean Dobson, chief executive of Amherst, a single-family rental firm that owns about 47,000 homes. “This is anti-free-market, anti-property-rights kind of policy.” (…)

Shares of home builders also fell on Wednesday. These firms sometimes sell their excess supply to large investors or build homes specifically for these firms to rent. (…)

Bloomberg:

(…) It’s also important to note that large institutional investors, the target of the president’s proposal, own a very small share of America’s single-family homes — about 0.5%, according to Blackstone and the American Enterprise Institute. When it comes to rental units, the figure is slightly higher but still small: According to Invitation Homes Inc., a single-family rental operator that owns just over 100,000 homes, institutions that own more than 1,000 homes hold just 3.3% of the 14 million single-family rental units outstanding in the US. For context, there are about 85 million single-family homes in the country.

Notably, institutional purchases have declined significantly over the past few years for the same reason that households have pulled back on buying homes: Higher interest rates and rising costs have made homeowning less financially attractive than it was in the 2010s.

At the same time, even as they account for a small share of homeowners, institutional homeowners have been useful in providing liquidity and market stability over the past 15 years. During the foreclosure crisis in the early 2010s, home prices were falling, unemployment was high, bank balance sheets were stressed, and demand for rentals outpaced demand for purchases. Institutional homebuyers played a crucial role by buying up homes and renting them out. More recently, when homebuying demand plunged in late 2022 after the Federal Reserve raised interest rates, homebuilders were able to offload new homes they were struggling to sell to individuals to institutional investors.

Having a known “buyer of last resort” helps give homebuilders the confidence to build more homes than they otherwise might. They know that even if the market gets shaky and individual homebuyers get skittish, institutional investors are willing to buy. This ability to smooth out demand — selling homes primarily to households, a modest amount to build-to-rent operators, and then to institutional investors when market conditions turn challenging — is mutually beneficial. It helps de-risk an industry that’s inherently risky and cyclical, provides steady employment for construction workers and other tradespeople, and reduces the risk of homebuilder bankruptcies. (…)

If this is the most the industry can expect from the White House when it comes to housing, then homebuilders may be better off simply cutting production until market conditions improve. (…)

Apollo Global Management just released its US Housing Outlook chart package. Here are a few charts related to the above.