👀 Nvidia's rival is going public

What’s going on here?

Data out on Friday showed that the US created fewer jobs than expected, while the unemployment rate ticked up.

What does this mean?

Nonfarm payrolls are a monthly way of taking a read on employment levels in the US – excluding some industries like farming. This month, the stats won’t be a reassuring read for jobseekers. The country added a shaky 114,000 jobs versus the predicted 175,000, while the unemployment rate ticked up to a higher-than-expected 4.3% – the highest level in nearly three years. Plus, the average hourly wage was up 3.6%, lower than the predicted 3.7%. That suggests companies might be straining under the weight of high interest rates, and that would pile pressure on the Federal Reserve (Fed).

Why should I care?

For markets: Falling off the tightrope.

The Fed doesn’t want to cut rates too quickly, as that could undo much of the progress made against inflation. But the central bank may be regretting its decision after this week’s data. Traders are still pricing in a 0.5% cut in September, with more to follow later in the year. Although, there are concerns that may be too late, with a hard landing seeming increasingly likely. That explains why some investors are running to “safe-haven” assets like US bonds.

The bigger picture: Running for the exit.

The Bank of Japan increased interest rates this week to support the stumbling yen. And because that forced traders who were betting against the yen to close their positions, the hike was rewarded with a strong rally. But that change also triggered a massive sell-off in Japanese stocks, because investors had borrowed the cheap yen to invest in stocks with higher returns. So one hike meant everyone rushed for the exits, causing the country’s main stock indexes to fall more than 7% in the last two days.

What’s going on here?

US chip designer Cerebras Systems, filed for an initial public offering (IPO), bringing its rivalry with Nvidia into the public eye.

What does this mean?

This IPO would be a major moment for the semiconductor world, marking the arrival on the scene of what many see as Nvidia’s biggest threat. After all, Cerebras specializes in AI-optimized semiconductors, boasting the signature CS-3 chip – rumored to sell for millions – that can be linked together to form supercomputers. So at only eight years old, the plucky US startup has developed tech that easily overshadows chips from Intel and AMD. No wonder the company is reportedly targeting a valuation higher than the $4 billion it secured in its 2021 funding round.

Why should I care?

Zooming out: Come quick, the party’s nearly over.

Mind you, Cerebras might be turning up unfashionably late. Only a few months ago, investors were obsessed with anything AI. But now, they’re growing skeptical about the tech’s ability to actually deliver significant cost-savings and profit. That’s why many investors have been shifting their attention from tech to value stocks lately. Although, the Federal Reserve might be able to relieve some pressure. If the central bank cuts rates in September, US stocks – especially small ones – would see the positive effect of lower borrowing costs on their balance sheets. Plus, the IPO market’s more likely to hit its stride in a lower rate environment, when company valuations and investor confidence both sit a little higher.

The bigger picture: Intel hasn’t nailed the smarts.

Intel saw 20% of its value vanish overnight, after the US chipmaker reported disappointing quarterly sales this week. The company hasn’t quite cracked AI like its rivals, and demand for its non-AI processors – the backbone of Intel’s business – hasn’t made up the gap. That explains why Intel’s shifting to self-preservation mode, focusing on cutting costs and spending less instead of chasing radical innovation.