By Sam Sutton

Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.

Chipmakers and Big Tech companies have helped keep the stock market in the money in 2023. Their continued outperformance could hinge on their ability to prepare for any retaliation from China over President Joe Biden’s outbound investment order.

Biden’s widely telegraphed order, which was announced earlier this month, is intended to curtail U.S. investors from financing quantum computing and artificial intelligence businesses in China. The White House has characterized those businesses as a possible national security threat and China’s ambassador to the U.S. Xie Feng warned in July that his government would “not flinch from provocations.”

Commerce Secretary Gina Raimondo’s trip to Beijing this week is expected to include ample discussions over the fallout. Raimondo developing “a better understanding where China will respond to the outbound investment EO is one of the most significant outcomes that can actually come out of this and be useful for the U.S. private sector to hear,” Josh Lipsky, the senior director of the Atlantic Council's GeoEconomics Center, told MM.

Most traders have likely already priced in how Biden’s order will affect highly touted chipmakers, Lipsky said, but the potential effects of any subsequent tit-for-tat remains unknown. That’s particularly relevant for Nvidia, whose chips have become a coin of the realm for A.I. startups that have attracted billions of dollars in investment from venture capital firms and strategic investors. Its chips are now prized enough to serve as collateral to multibillion dollar loans.

With a $1.2 trillion market cap, Nvidia is now the fourth-largest component of the S&P 500. Markets climbed on Monday when the company’s shares spiked in anticipation of a positive second-quarter earnings release scheduled for Wednesday. Some analysts are warning that investors’ enthusiasm for Nvidia may be creating unreasonably high expectations for its future performance, Reuters’ Chavi Mehta reported.

“I don't see this as the [Biden] order itself creating economic headwinds, but certainly retaliation from the order could,” Lipsky said.

IT’S TUESDAY — All this talk of chips is making me anxious about a dip (groan). Send tips, gossip and suggestions to Sam at [email protected].

A NEW PODCAST FROM POLITICO: Our new POLITICO Tech podcast is your daily download on the disruption that technology is bringing to politics and policy around the world. From AI and the metaverse to disinformation and cybersecurity, POLITICO Tech explores how today’s technology is shaping our world — and driving the policy decisions, innovations and industries that will matter tomorrow. SUBSCRIBE AND START LISTENING TODAY.

Existing home sales data for July will be released at 10 a.m. … Federal Reserve Gov. Michelle Bowman and Chicago Federal Reserve Bank President Austan Goolsbee will participate in a forum on youth employment at 2:30 p.m.

It’s not just outbound — The NYT’s Alan Rappeport: “At a moment when Washington is trying to reset its tense relationship with China, states across the country are leaning into anti-Chinese sentiment and crafting or enacting sweeping rules aimed at severing economic ties with Beijing.”

— Chinese officials blasted Biden, South Korea’s Yoon Suk Yeol and Japanese Prime Minister Fumio Kishida’s discussion to de-risk global supply chains from exposure to China as a “deliberate attempt to sow discord,” according to Bloomberg.

China’s economic gameplan — Bloomberg’s Rebecca Choong Wilkins and Colum Murphy on President Xi Jinping’s next steps: “Where Biden has opted to run his economy hot, spending trillions of dollars on household stimulus and infrastructure to goose the economy, Xi is running his cold in a bid to finally break China’s addiction to fueling growth with speculative apartment construction and low-return projects funded by opaque local borrowing. If China is a ‘ticking time bomb,’ Xi’s aim is to defuse it.”

Shutdown watch — Our Jordain Carney reports that the House Freedom Caucus “said it would oppose any short-term stopgap unless leadership meets a slew of their demands.” Those include passage of a major GOP border bill that’s been stalled in the Senate, addressing “the unprecedented weaponization” of the Justice Department and FBI and nixing “woke” Defense Department policies.

More signs of trouble for the wealthy — The WSJ’s Ben Eisen and Rachel Louise Ensign: “Banks are tapping the brakes on big home loans known as jumbo mortgages, which they have typically viewed as a low-risk way to attract wealthy customers. In the past year, the Federal Reserve’s steep interest-rate increases and a series of bank failures have dimmed their appetite. Now affluent home buyers are no longer getting the special treatment and preferential rates they hoped for.”

— The FT: “US Treasury yields hit 16-year high on fears over interest rate outlook”

So, they’ll move to Florida — New York and California have ”lost firms that managed close to $1 trillion of assets” to southern states like Florida and Texas, according to Bloomberg’s Linly Lin and Tom Maloney. “The exodus from the Northeast and West Coast has meant the loss of thousands of high-paying jobs, straining city and state finances by sapping tax revenue. Commercial property markets have also lost valuable tenants at the same time they’ve been struggling with the new realities of hybrid work.”

— One of the firms that relocated, Charles Schwab, is reportedly planning “to cut jobs and close or downsize offices to achieve at least $500 million in annual cost savings as the brokerage responds to investor pressure,” according to Bloomberg’s Silla Brush.

Another data point in the “things just feel expensive” ledger — The WSJ’s Ben Foldy: “Five years ago, there were a dozen models of new cars that sold for less than $20,000. In 2023, there was only one.”

The ties that bind — Bloomberg’s Olga Kharif: “Coinbase Global Inc., the biggest US crypto exchange, has taken a stake in stablecoin issuer Circle citing ‘growing regulatory clarity for stablecoins in the US’ and elsewhere.”

DON’T MISS POLITICO’S TECH & AI SUMMIT: America’s ability to lead and champion emerging innovations in technology like generative AI will shape our industries, manufacturing base and future economy. Do we have the right policies in place to secure that future? How will the U.S. retain its status as the global tech leader? Join POLITICO on Sept. 27 for our Tech & AI Summit to hear what the public and private sectors need to do to sharpen our competitive edge amidst rising global competitors and rapidly evolving disruptive technologies. REGISTER HERE.

Price fixing — Our Josh Sisco: “Two generic drug giants agreed Monday to settle long-running criminal price-fixing charges with the Justice Department, including the unusual move to sell off the drugs involved.”

Across the pond — Our Hannah Brenton: “U.K. politicians say they won’t raid bank profits. The banks don’t believe them.”

Follow us on Twitter

Follow us

To change your alert settings, please log in at https://www.politico.com/_login?base=https%3A%2F%2Fwww.politico.com/settings

This email was sent to [email protected] by: POLITICO, LLC 1000 Wilson Blvd. Arlington, VA, 22209, USA

Please click here and follow the steps to unsubscribe.