By Ahmad Assiri, Research Strategist at Pepperstone
Risk appetite retreated in Asian markets today as the rally of last week lost steam, compounded by post-earnings weakness in Nvidia. The broader picture carried a blend of concerns stretching from Wall Street to Asia’s capitals. Nvidia’s Q2 numbers, released after the US close, were objectively strong – revenues came in at $46.7 billion, up more than 50% year-on-year, broadly in line with expectations. Yet the stock sold off in after-hours trading.
The issue was not the headline figures but the guidance, management excluded China from forward sales outlooks, a market worth more than $5 billion annually in high-end semiconductors. That decision underscored how geopolitics is reshaping the operating environment for the world’s most important technology companies, reminding investors that AI’s explosive growth story is increasingly subject to government oversight and trade restrictions.
The result is a classic problem of expectations. Even record results are not enough if they fail to clear the very high bar markets have set. Nvidia remains central to the AI investment narrative, but positioning is now more complex after 100%+ gains in recent months. The trade is no longer a one-way bet, it requires nuance and selective entry.
On another front, Washington’s decision to double tariffs on Indian exports, up to 50%, has raised fresh questions about the durability of India’s growth story. The measures cover a broad swath of goods, from apparel and footwear to furniture, gems, and chemicals. At the heart of the dispute lies New Delhi’s continued imports of discounted Russian oil. While India benefits from savings of 5 – 7% on crude purchases, an estimated $3.5 billion annually, the cost of US tariffs could weigh more than $20 billion on the country’s $86 billion export flow to the US. The numbers alone suggest the trade-off is unfavorable, but this is less an economic calculation than a political one.
For Prime Minister Modi, leverage is thin, and the tariffs are a reminder that emerging-market diversification away from China does not insulate investors from geopolitics, it merely shifts the axis of risk. Markets responded accordingly, with sentiment toward Indian assets deteriorating. Should tariffs persist, they could pressure FDI inflows and drag growth lower to 6% this year, alongside potential job losses in exposed sectors.
Meanwhile, the US political scene added more uncertainty. President Trump’s dismissal of Federal Reserve Governor Lisa Cook has opened a legal debate over the scope of executive authority, but for markets the message was more straightforward, politicised central banking translates into higher risk premia. While the immediate asset-price reaction was muted, markets doubt this episode will alter near-term Fed policy. If investors perceive long term rate decisions are guided by political calculus rather than macroeconomics, Treasury yields could embed a higher structural risk premium.
Pulling these threads together, the global market picture is one of balance. Nvidia shows that AI remains the engine of growth but with expectations stretched. US tariffs on India highlight how trade disputes can escalate when strategic interests diverge. AI remains the defining growth theme but no longer an easy trade. The coming weeks will prove critical in showing whether markets can regain confidence and resume their climb or whether they remain mired in bouts of selective and range-bound trading.