Nvidia’s shares decreased due to softer guidance and the exclusion of China sales from its forecasts, affecting US equity futures. Nvidia’s fiscal Q2 revenue was US$46.7bn, above expectations, but guidance for Q3 was around US$54bn, which fell short of some anticipations. Uncertainty regarding China H20 chip sales was mentioned, with potential upside if approvals happen. Nvidia authorised share buybacks amid AI demand strength.

Japan’s tariff negotiator Akazawa cancelled a US visit to focus on domestic discussions. BOJ board member Nakagawa warned of trade risks, noting the Tankan survey’s importance in evaluating impacts. USD/JPY traded within a narrow range, and major currencies saw slight weakening against the dollar.

Capital Expenditures and Interest Rates

In Australia, the Q2 headline capex spend rose 0.2%, below the expected 0.7%. Bank of Korea maintained its base rate at 2.5%. China conducted constructive trade talks in Canada and aimed to boost AI chip output. New Zealand’s business confidence slightly improved, and UK services confidence dropped, with CBI warning of costs and weak demand.

Japan’s Nikkei 225 increased by 0.7%, while Hong Kong’s Hang Seng fell by 0.6%. The Shanghai Composite rose 0.1%, and Australia’s S&P/ASX 200 also edged up by 0.1%.

Nvidia’s report is a clear signal that the AI-fueled rally is losing momentum, even if the numbers were technically good. The market’s negative reaction to guidance that wasn’t a massive blowout shows how stretched expectations have become. We should consider buying September or October put options on the Nasdaq 100 (QQQ) to hedge against a broader tech sector pullback.

Opportunities in Volatility Products

This wobble in the market’s biggest leader creates an opportunity in volatility products. The CBOE Volatility Index (VIX) has been suppressed, recently trading below 16, which is low given the growing list of macroeconomic concerns. Buying VIX call options or futures is an increasingly sensible portfolio hedge against the complacency we’ve seen all summer.

We’ve seen this pattern before, where a handful of mega-cap tech stocks drive the entire market, like in late 2021 before the 2022 downturn. The fact that Nvidia’s stellar results were not enough to push futures higher is a significant warning sign. It suggests the easy money in the AI trade has been made, and it’s time to protect profits by selling out-of-the-money call spreads on high-flying tech names.

The simmering trade disputes mentioned are no longer just background noise and are clearly expanding beyond the US and China. The World Trade Organization has already noted that global merchandise trade volumes grew by a meager 0.9% in the first half of 2025, citing these exact frictions. This environment supports a stronger U.S. dollar, making long positions in the dollar index (DXY) against a basket of trade-sensitive currencies attractive.

In the currency market, the Bank of Japan’s explicit warning on tariffs while USD/JPY hovers near 147.50 is particularly noteworthy. We saw significant Japanese government intervention to support the yen back in 2022 when the dollar rose past the 145 level. The current inaction from the BOJ, combined with geopolitical risk, suggests we could see a sharp move, making options strategies like a long straddle on USD/JPY a way to play the rising potential for a breakout.

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