Can China Relations Prevent More Nasdaq Record Highs

The tech-heavy Nasdaq ended August just off its all-time high as investors look to AI spending, digest Nvidia's earnings, and question whether the China rivalry will have an impact in the latter half of the year.

The Key Developments

• Markets react positively to Nvidia's earnings, despite the company's stock underperforming amid solid sales growth.
• Nvidia CEO reassured investors that AI demand remains solid, with hundreds of billions in AI infrastructure expected to be announced.
• The lack of H20 sales in China underscores the intensifying rivalry between Washington and Beijing that could generate uncertainty in the future.

Nvidia: AI Boom Is Still On

last week, with the stock price falling in the aftermath of the release; however, the overall market, including the Nasdaq, remained supported. The tech companies' earnings were "solid" but apparently didn't match the hype of investors expecting an even bigger beat. Profit-taking on the last day of August weighed on stock markets across the board and prevented the Nasdaq from joining its peers in scoring a new record high. Traditionally, September is the worst-performing month for stocks, including high-valuation tech stocks like Nvidia. Some traders, however, may hope that increased chances of a Fed rate cut this month could help support stocks, despite equity valuations rising to .

As expected, Nvidia's earnings provided some additional insight into the AI market, which is understood to be one of the main drivers pushing the Nasdaq, in particular, higher. Rumours had persisted that companies at the centre of the AI surge might cut back on spending, as the technology has yet to generate significant returns. Earlier in August, Meta paused hiring in its AI R&D division, stating that it was part of a broader restructuring of the group. However, in a conference call following Nvidia's earnings, CEO , expecting $3-4 trillion in AI infrastructure spending by the end of the decade. Big tech has spent $155 billion so far this year and is expected to spend hundreds of billions more.

But China Concerns Remain

The rivalry between the US and China extends beyond trade and into AI, with , adding uncertainty to the company's outlook and potentially to the broader AI-driven tech sector. The company noted that it didn't sell any of its H20 chips, specifically designed for China, to its intended market. This came after agreeing to a 15% tax to be paid to the US government as part of a deal to regain permission from Washington to export semi-advanced chips to China. But authorities in of the chips, effectively preventing them from being sold. Around 13% of Nvidia's revenue comes from the Chinese market for lower technology chips. China is reportedly trying to promote chip sovereignty, with companies like Huawei looking to rival Nvidia in advanced chip production. The trade war has intensified those efforts, with launches of more efficient Chinese alternatives to Western AI, such as Deepseek, having weighed on the tech sector in the past.

Ascending Broadening Wedge in Nasdaq Remains in Place

The Nasdaq paired losses on Tuesday after opening down and playing catch-up to the weekend's news, allowing price action to fall into a potential double bottom. If upcoming data signals a rebound, it could face resistance at its upper Bollinger band near 23700 before heading towards a new record above 24000. However, if the index breaks through the lower BB at 23100 and finds new lows for the week, it could retrace back to the August bottom at 22700 for support.

Source: SpreadEx | US Tech 100, Daily