Wall Street was on track for a subdued start on Monday as major chip companies slipped on the eve of a key tariff deadline after a trade policy shift that involves sharing a portion of revenue from China sales with the Trump administration.Semiconductor giant Nvidia (NASDAQ:NVDA) slipped 0.4% in premarket trading, while Advanced Micro Devices (NASDAQ:AMD) lost 1.2%.
A U.S. official told Reuters the companies had agreed to give the United States government 15% of revenue from sales of their advanced computer chips to China, days after the Commerce Department began issuing licenses for the sale of Nvidia’s H20 chips.
Enabling semiconductor sales to China was an integral issue in the agreement Washington signed with Beijing earlier this year and markets will be keen to know if the latest development will impact the relationship between the world’s two largest economies. The deal expires on Tuesday.
"It’s a good way for the United States government to increase its cash and income... but a lot of people are going to argue that this is the wrong way to go," said Robert Pavlik, senior portfolio manager at Dakota Wealth.
"The Chinese government will probably use it as a point to argue that they need different chips because these particular chips might be susceptible to be reviewed by the Americans."
Markets also sought clarity on the sector tariffs U.S. President Donald Trump has announced.
At 08:48 a.m. ET, Dow E-minis were up 64 points, or 0.14%, S&P 500 E-minis were up 4.75 points, or 0.07%, and Nasdaq 100 E-minis were up 8.5 points, or 0.04%.
Traders took a step back after last week’s rally helped the S&P 500 and the Nasdaq log their strongest weekly performance in more than a month.
Investors expect that the recent shake-up at the U.S. Federal Reserve and signs of labor market weakness could nudge the central bank into adopting a dovish monetary policy stance later this year, fueling much of the optimism.
July’s consumer inflation report is due on Tuesday and investors currently anticipate that the Fed will lower borrowing costs by about 60 basis points by December, according to data compiled by LSEG.
A better-than-feared earnings season brought some relief and BofA’s monthly fund manager survey showed that owning megacap stocks was again the most popular trade.
Apple (NASDAQ:AAPL) was a standout last week following its biggest weekly showing in five years after the iPhone maker unveiled a series of U.S. investment pledges. The company’s shares were down 0.5% on Monday.
In earnings, Micron (NASDAQ:MU) raised its forecast for fourth-quarter revenue and adjusted profit, reflecting strong demand for artificial intelligence and sending shares of the chip company up 5.1%.
U.S.-listed shares of lithium producers rose. Albemarle (NYSE:ALB) and Lithium Americas (NYSE:LAC) gained more than 10% each after Chinese battery giant Contemporary Amperex Technology (CATL) halted output at a major mine, raising hopes that it would erode the oversupply in a market grappling with soft demand.
Intel (NASDAQ:INTC) was up 2.7% after a report said CEO Lip-Bu Tan was expected to visit the White House. Trump had called for his removal last week.
Trump is expected to meet Russia’s President Vladimir Putin on Friday to try and negotiate an end to the war on Ukraine.