Monthly Review - August 2025
In brief
The markets
1.9%
-0.9%
2.9%
0.6%
-0.7%
3.7%
0.6%
3.5%
4.5%
Source: Bloomberg 29.08.2025, returns in local currency
Top stories
Big deals and little deals
President Trump negotiated a "little deal" with advanced chipmakers Nvidia and AMD, whereby 15% of the value of sales to China will be given to the US state. It is an unprecedented arrangement, as is the US government's plan to take a 10% stake in the struggling chipmaker Intel, in exchange for Biden-era grants. Elsewhere on the trade front, negotiations between the US and China were extended for another 90 days. Meanwhile Switzerland was stunned by a 39% tariff on selected imports, including a levy on gold bars, among Switzerland's biggest exports to the US.
Fed still under fire
US Federal Reserve (Fed) chair Jay Powell spoke of "shifting" economic risks at his speech during the annual Jackson Hole symposium. His resolve to remain data dependent, despite repeated attacks from the Trump administration, earned him a standing ovation from his fellow central bankers. The recent economic shift sets an uptick in US inflation, due to higher import tariffs, against downward revisions to the monthly jobs data. Meanwhile, President Trump pushed to fire another of the Fed's governors, aiming to install a candidate more sympathetic to his demands for lower interest rates. Market odds of a September cut remained above 75%.
Better and also cheaper
The long awaited ChatGPT-5 was launched by OpenAI. This latest AI (artificial intelligence) tool offers enhanced capabilities at cheaper pricing levels, aiming to broaden demand. A response perhaps to Chinese competitor DeepSeek, whose lower priced AI tool rocked the sector earlier this year. OpenAI is reportedly in talks for a future share sale at a valuation of $500 billion, which would make it the world's most valuable private technology group. Nonetheless, the US tech sector wobbled after research by the MIT (Massachusetts Institute of Technology) claimed that 95% of recent investments in generative AI have yielded zero returns.
AI energy burn
The big tech names behind the AI boom frequently attempt to mitigate their environmental impact by purchasing clean energy credits. In reality, however, soaring demand for power hungry data centres is exerting significant pressure on existing electricity grids, with the shortfall being met by ramping up investment in fossil fuels. In the US alone, around 20% of the gas power capacity currently under development is specifically earmarked for data centres. At the same time, President Trump's offensive against renewables has seen nearly $19 billion of clean energy projects cancelled, including Danish firm Ørsted’s $1.5 billion offshore wind farm off Rhode Island.
On the radar
After President Trump fired US Bureau of Labour Statistics Commissioner Erika McEntarfer and pushed to fire Federal Reserve Governor Lisa Cook, investors are becoming increasingly nervous about political interference. Questions will continue to arise over the independence and credibility of US institutions.
After the brief dip in US tech stocks in August, the sector will likely remain in the spotlight. Markets will be looking for evidence that huge investments in AI technology could bring genuine productivity improvements.
With the backdrop of cooling US jobs data and sticky inflation, dovish commentary from Fed chair Jay Powell at the Jackson Hole annual symposium offered investors a ray of hope for looser monetary policy. Will the central bank deliver a rate cut at its September meeting?