Trump Tariffs: Customers Expecting Payback, Says Swiss Chemicals Business | The Pulse 2/26
Speakers
Summary
- Nvidia & AI CapEx: Nvidia beat estimates with 70% revenue growth, but the market reaction is muted due to extremely high expectations. Hyperscalers have committed ~$650B in CapEx for 2026, securing near-term demand, but a disconnect remains between this infrastructure spend and actual enterprise AI adoption.
- Credit Markets > Equity for AI: PGIM's CIO argues the "real AI story" is shifting to credit markets. There is a $5.3T financing need over the next 5 years, with software and AI-related debt issuance becoming the primary growth driver in credit.
- Japan's Paradox: A contrarian view on Japan suggests that while JGB yields will rise (prices fall), the Yen will continue to weaken due to structural readjustments and capital recycling, breaking the traditional "higher rates = stronger currency" correlation.
- European Industrial Decline: European chemical production remains 20% below pre-COVID levels due to energy costs (gas is 2x the price of US/Russia). Meanwhile, Chinese EV manufacturers (BYD) are aggressively taking market share from German automakers within Europe.
- Geopolitical Risk Premium: With a Trump-imposed deadline for an Iran deal approaching (March 1-6) and evidence of Iran rebuilding nuclear facilities, the risk of a military strike and subsequent oil spike is rising, despite the US desire for lower energy prices.
Trade Ideas
Hyperscalers (Amazon, Microsoft, Google) announced ~$650B in CapEx plans for 2026 a few weeks ago. Nvidia's forward guide points to 80% revenue growth. The massive, committed capital expenditure from Hyperscalers guarantees near-term order flow for Nvidia's chips, regardless of immediate enterprise adoption. The "infrastructure build" phase is fully funded. LONG. The cash flow is locked in via Hyperscaler budgets. If enterprise demand for "scaled AI" (not just pilots) doesn't materialize, Hyperscalers may cut CapEx in 2027.
There is $5.3T in financing needs over the next 5 years. Peters notes a "clear revisitation of the software space" in credit markets, with massive debt issuance (e.g., Google's recent deal) hitting the market. Equity valuations in AI are stretched and volatile. The debt market offers a cleaner way to play the AI infrastructure build-out ($5.3T need) with better risk-adjusted returns and seniority in the capital structure. LONG. Buy the debt of major tech/software firms financing the AI boom. Higher-for-longer interest rates increasing default risk for lower-quality software issuers.
Trump has set a deadline of March 1-6 for an Iran deal. Satellite imagery shows Iran rebuilding nuclear facilities. US/Israel are on high alert for potential military action. If a deal isn't reached, the likelihood of a strike on Iran increases. Iran has threatened to close the Strait of Hormuz or target regional oil infrastructure in retaliation, which would cause an immediate spike in oil prices. LONG. As a geopolitical hedge against the March deadline. A diplomatic breakthrough or a "limited" strike that doesn't impact oil supply infrastructure.
Gregory Peters
Co-Chief Investment Officer, PGIM Fixed Income
Japan has a "broken bond market" due to years of intervention. Peters expects JGB rates to continue moving higher but explicitly states, "I expect the currency continue to weaken as well." Typically, higher rates strengthen a currency. Peters argues Japan is in a unique "cycle of readjustment" where rising yields trigger capital flight or carry trade unwinds that paradoxically weaken the Yen further while bonds sell off. SHORT JGBs (expecting higher yields) and SHORT JPY (expecting currency weakness). A sudden hawkish pivot by the BOJ that is more aggressive than priced in could spike the Yen.
Oliver Crook
Chief European Correspondent, Bloomberg
BYD's market share in Europe jumped from 0.7% to nearly 2% in a year. European chemical production is 20% below pre-COVID levels due to energy costs (gas is 30 Euros/MWh vs. cheap US/Russian gas). Europe faces a dual squeeze: structural uncompetitiveness in energy-intensive industries (Chemicals) and rapid loss of market share in its crown jewel sector (Autos) to Chinese competitors who are building local factories to bypass tariffs. AVOID. The industrial base is eroding structurally. Significant EU protectionist tariffs or subsidies that effectively block Chinese competition.
Up Next
This Bloomberg Markets video, published February 26, 2026, features Matt Bloxham, Gregory Peters, Paul Wallace, Oliver Crook discussing NVDA, SKYY, CREDIT, IGV, ITA, WTI, JGB10Y, EWG. 5 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Matt Bloxham, Gregory Peters, Paul Wallace, Oliver Crook · Tickers: NVDA, SKYY, CREDIT, IGV, ITA, WTI, JGB10Y, EWG