FT : Can hedge funds prosper without their star trader founders?

Can hedge funds prosper without their star trader founders?
Two of the biggest names in global macro trading, Alan Howard and Chris Rokos, embody differing approaches to legacy

In late 2019, hedge fund trader Chris Rokos convened his top portfolio managers at the firm’s Mayfair offices.

Performance at his four-year-old hedge fund Rokos Capital Management had been poor, and it was time for the firm’s mercurial founder to take matters into his own hands.

Rokos told his assembled lieutenants that all key investment decisions would now go through him and they would no longer be able to manage their own money. RCM saw this as a necessary strategic shift to better encourage collaboration, but several of those portfolio managers departed in the months following.

Around the same time and just a few blocks away in Marylebone, traders at Brevan Howard, the hedge fund Rokos had co-founded some two decades earlier, were also on the cusp of a new chapter. The firm’s billionaire CEO and co-founder Alan Howard had just anointed a successor.

While he would continue to trade, Howard was beginning to lay the groundwork for a Brevan Howard that he hoped would one day carry on without him. The vision was the inverse of what Rokos had engineered — what one person close to the firm characterised as the opposite of “key man risk” — namely, a firm propelled by the efforts of legions of autonomous traders, rather than by star traders making big bets.

But years later, and despite these efforts, both men are grappling with a perennial issue that faces hedge funds with a talented individual at their centre: how to create a sustainable business that can outlive them.

The onetime colleagues turned rivals are among the last of the prominent big name traders in so-called global macro, one of the world’s oldest hedge fund strategies, which involves betting on the back of macroeconomic trends.

The $4.5tn hedge fund industry has undergone a shift away from the days when the lions of macro trading like George Soros, Paul Tudor Jones and Louis Bacon placed huge wagers on swings in interest rates, currencies and equities. Instead, the industry has professionalised into polished businesses — multi-manager firms like Citadel, Millennium Management and Point72 — that have tried to de-emphasise the investment prowess of a founder.

The star traders that remain now face the challenge of proving to investors that the hedge funds they created can thrive without them.


Howard, 61, has seemingly created a durable business powered by the efforts of a team, but amid a recent run of poor performance he has been more involved with the master fund, raising the question of whether he can ever truly disentangle himself from the eponymous firm where he is the majority owner.

For his part, the 54-year-old Rokos has leaned into his star trader credentials but in doing so has — as things stand — complicated the prospect of the firm outlasting him. People close to the firm say RCM is bigger than one man and succession is not an immediate concern.

History suggests evolution is inevitable. “Most hedge funds either become firms that handle multiple portfolio managers . . . or they die with the founder,” says Rick Sopher, CEO of wealth manager Edmond de Rothschild and chair of LCH Investments, which has been investing in hedge funds since 1969.

Alan Howard formed Brevan Howard in 2002, when he, Rokos and a group of colleagues spun out of the Credit Suisse First Boston proprietary trading desk.

From the very beginning, Howard himself was at the centre of the hedge fund’s evolution. He was its key portfolio manager, managing billions of dollars of investor money, and as the firm’s CEO also managed its growth strategy.

“Alan could trade 100 things a day,” recalls one former Brevan portfolio manager. “He processed information at an incredible speed.” Another says his former boss seemed to possess a photographic memory.


Aided by a wide network of contacts in central banks and external consultants, Howard was perceived as a master of understanding the way officials thought about policy decisions. This translated into a series of well-timed trades on the direction of interest rates.

According to multiple people that worked with him, Howard had a reputation as a conservative trader, structuring asymmetric positions and saving his biggest bets for when he was highly confident of an outcome.

Rokos, in contrast, was known for his huge appetite for risk. “If Rokos thinks the Japanese market will go up, he will put options, futures, swaps on, all [positioned] one way,” says a portfolio manager who worked with both men.

The younger man’s edge was his mastery of the bond yield curve — understanding the different interest rates paid for short and long-dated debt — and a single-mindedness that verged on the obsessive when it came to analysing trades.

Rokos was known to ask piercing questions of portfolio managers and analysts, and sometimes seemed to know people’s trades better than they themselves did.

The approach was very lucrative: during Rokos’s 10 years at Brevan Howard, he single-handedly made over $4bn for its master fund and $900mn for himself, according to court documents.

While both men contributed to Brevan Howard’s growing clout, it was Howard’s defensive trades in 2008 in anticipation of a market crash that helped catapult the firm into hedge fund royalty.

When the average hedge fund lost 19 per cent in 2008, the Brevan Howard master fund made over 20 per cent.

Howard’s trading talents were accompanied by a savvy business nous. He jumped on Brevan’s newfound reputation as a port in the storm during the financial crisis, and pitched his firm as a way to protect assets during down markets and as a long-term partner for institutional investors. This approach would resonate with investors, propelling Brevan’s assets to $40bn by 2013.

But as it grew, the firm’s character began to change. Rather than rely on a few star traders to make most of the firm’s profits, it shifted towards more of a numbers game. The idea was to use a tight risk management framework to prevent the majority of traders from blowing up, while enabling a few traders each year to hit home runs.

In 2012, co-founder Rokos left the firm and later sued Brevan to release himself from a five-year non-compete agreement.

As the legal battle raged over the ensuing years, Brevan’s performance started to suffer. Central banks brought interest rates down dramatically to near zero, reducing the volatility of bond prices, which made it more difficult for macro hedge funds to make money.

The firm also struggled to put all of its newly raised money to good use. Howard acknowledged in 2016 that the master fund had grown too large at its $27bn peak and that it was the “wrong size for the markets we have our primary focus in”.

But portfolio managers who worked there at the time say the departure of Rokos also made a difference, describing him as the yin to Howard’s yang.

“Having the two intellectual powerhouses of Chris and Alan under one roof served them well; they were a nice counterbalance,” says one former portfolio manager. “[Chris’s departure] reconfigured the balance.”

Howard had built one of the world’s largest hedge funds, and one of the industry’s most recognisable brands, but one thing still eluded him. He hadn’t proved that Brevan Howard was fully capable of moving past its star-trader roots.

By 2015, Rokos had finally settled out of court with his former employer and got the green light to launch his own hedge fund. He even secured an investment from Howard himself.

Initially, Rokos Capital Management looked similar to an early Brevan: the risk-taking was concentrated in its founder, surrounded by specialist portfolio managers with the latitude to trade their own strategies.

But with the exception of a stellar 2016, performance was disappointing. The fund was down a few percentage points in 2015, 2017 and up only 2 per cent in 2018.

Rokos’s move the following year, seen as centralising control around himself, would prove a crucial turning point.

Performance radically improved, delivering enormous returns of 51 per cent in 2022 and 44 per cent in 2020. At the same time, it was far more volatile: the fund lost a quarter of its value in 2021. In contrast, Brevan Howard’s master fund has never lost more than 5 per cent in a single year.


Putting more control in the hands of its founder makes RCM a rare beast in the world of hedge funds. Today, multi-strategy funds — sometimes nicknamed “pod shops” — typically employ dozens of teams trading different strategies within a tight risk management framework.

“Chris is the antithesis of a multistrat,” says the head of one large macro hedge fund rival. “There is one pod and it’s him.”

Rokos meets with the 30 or so investment officers regularly and rewards those that give him the best ideas.

“The best way to put it is this: Chris’s ideas are everyone’s ideas, and everyone’s ideas are Chris’s ideas,” says a partner at RCM. “He relies on them [investment officers] to give him guidance . . . he is one man, if a brilliant one.”

A person familiar with the firm’s thinking disputes the assessment that Rokos centralised control around himself, saying instead that the firm built a collaborative model between sector experts overseen by Rokos. The person adds that there is a section of the portfolio that allows investment officers to make preapproved trades.

While the firm has grown substantially since 2015, with over 340 staff, its success is still seen as largely down to Rokos’s market insights and trading nous. This makes it vulnerable to large-scale redemptions if his circumstances were to change, investors and rivals say.

“Chris has done an amazing job,” says the rival. “[But] what if he breaks his leg? As an investor I would be incredibly nervous about being exposed to this genius.”

Rokos declined to comment, but the person familiar with the firm’s thinking says RCM has the investing and management talent to step up in the event of the founder’s absence.

While RCM was getting off the ground in 2015, Brevan was in the middle of an existential crisis. Performance was suffering, traders were leaving, and subsequent investor redemptions contributed to reducing assets by 84 per cent from its peak to just $6.4bn in 2019.

But it was too early to write off Howard. From a diminished asset base, in 2018 he roared back with an enormous bet against Italian debt, contributing to the master fund’s return of over 12 per cent that year.

This tentative turnaround set the stage in late 2019 for Howard to name his anointed successor CEO: Brevan’s longtime chief risk officer Aron Landy.

Internally, Landy is viewed as down-to-earth and approachable. The appointment marked a clear nod towards the firm’s emphasis on risk management and another attempt to reduce the spotlight on Howard.

Before his ascension, Landy had helped conceive of the Alpha Strategies fund, an offering launched in 2018 that aimed to provide more consistent returns that would complement the more volatile and directional master fund.


Investors responded well; Brevan’s assets grew fivefold to $35bn between 2019 and 2023, and it hired over 100 traders to support the burgeoning asset base.

It also diversified geographically. In 2023 Brevan selected Abu Dhabi — the self-styled “capital of capital” — as its headquarters for a Middle East expansion, lured by its low taxes and regulatory regime.

Here, Howard sensed both a fundraising opportunity and a chance to sell a stake in the business to a local sovereign wealth fund like the Abu Dhabi Investment Authority, according to several people familiar with the situation. In recent years, Howard has signalled to large institutional investors globally that he would be open to a conversation about selling a stake in the business, they say.

But there was one problem: performance. Brevan’s two main funds — the master fund and the Alpha Strategies fund — are both on the back foot after two years of lacklustre returns.

Investors have noticed, not least in the UAE. The opening of the Abu Dhabi office has not led to significant allocations from local investors, the people familiar with the situation say.

“The Emiratis have lots of money but they’re not idiots,” says one. “They’re not going to invest after two years of poor performance.”

Three investors say they believe Brevan raised too much money too quickly. “Investors are saying, ‘Isn’t this a case of Brevan Howard growing too large and are we not at the cusp of another period of no performance?’” one of them says, referring to a previous spell of poor returns that roughly coincided with its peak assets in 2013.

A person close to the company says that asset growth is spread across several funds and the firm carefully manages their capacity. It has strengthened its capital base and is growing its digital asset business. “No one individual determines the longevity of a fund or our firm any longer,” said the person close to the firm.

There are idiosyncratic challenges facing the two main funds, each running around $12bn.

For the master fund, returns from global macro are inherently lumpy. Bets are typically concentrated — if you’re wrong it’s painful. For the alpha strategies fund, it is about proving Landy’s approach is the right one.

It is not nearly as diversified as more established multi-manager firms such as Millennium and Citadel. Several people familiar with Brevan Howard questioned whether the macro mindset and risk framework is compatible with building a truly diversified multi-manager platform. “If you get those [macro] trades wrong and overlay that with Aron’s strict risk framework . . . you completely de-risk and miss the rebound.”

As performance has struggled, Howard seems unable to resist taking more of an active role. “In the second half of last year, Alan became more involved in the master fund,” mentoring and challenging portfolio managers on their views, according to a person with direct knowledge of this.

“Alan is key to the P&L and if he’s not involved, it’s not the same,” says a second rival. “As much as he wants to build a business for the future, it’s not that easy.”

The person close to Brevan Howard says the founder remains “deeply involved” in the strategic direction of the firm, but says the common goal is to “create something that outlives individuals”.

Rokos too has one eye on the future. He is further away from retirement than Howard, but people close to him say he is already thinking about how — and whether — his firm will survive a transition to the next generation.

“We are thinking about the next 10 years,” says one partner at the firm. “I don’t think anyone that has done it as long as he has wants his legacy to fizzle away.”

Rokos has been building up the firm’s senior ranks with potential successors, in a signal he has an eye on the next chapter. Earlier this year, the firm hired JPMorgan Chase’s co-head of global markets as its new deputy-chief investment officer, reporting directly to Rokos — his first investing deputy since 2022.

Insiders argue that there is plenty of talent at the firm supporting Rokos that might be able to take over one day, and that the firm is starting to evolve beyond its founder.

Ultimately, however, the decision on how well Brevan Howard or RCM will outlast their founders may come down not to the two men themselves, but to their backers.

“There are some funds where you stay with the key man and one day, when he retires, you retire with him,” says the second rival. “Not everything is repeatable.”

>>> What to look at today - 5th of March 2025

Stock markets staged a relief rally after US Commerce Secretary Howard Lutnick said the Trump administration may walk back some tariffs. US and European equity-index futures gained indicating the rally will continue. Traders are wading through a slew of news, with Beijing’s annual work report, Lutnick’s hints of a tariff compromise with Canada and Mexico, and Germany’s plan to boost defense spending all impacting markets. President Donald Trump defended his economic plans, while a regional Asian gauge rebounded. Treasuries held Tuesday’s declines and the dollar strengthened against all the Group-of-10 currencies. Hong Kong shares outperformed after the National People’s Congress in Beijing set an economic growth target of about 5% for 2025, a third straight year it has maintained that goal. Given the broadening global uncertainty on tariffs and geopolitics, economists expect Chinese officials to add stimulus. In European news, Germany said it will unlock hundreds of billions of euros for defense and infrastructure investments in a dramatic shift that upends its ironclad controls on government borrowing. The move drove the euro to a three-month high and sparked a selloff in global bond markets to bund futures to Treasuries. Frantic moves lashed markets all day Tuesday, as sentiment shifted quickly amid the slew of news. US stocks were particularly volatile, first plunging, then recovering, and falling anew at session’s end. While the S&P 500 closed down 1.2%, equities gained in late trading after Lutnick’s comments. In his address to Congress, Trump acknowledged that there may be an “adjustment period” to tariffs as he defended his policies to remake the US economy. He also called for an end to a $52 billion semiconductor subsidy program and repeated the 25% tariffs for aluminum, copper and steel. His speech comes as the latest data show economic activities slowing amid the uncertainties of a global trade war. The Aussie extended its drop and the won erased its gain after Trump spoke. The US could announce a pathway for tariff relief on Mexican and Canadian goods covered by North America’s free trade agreement as soon as Wednesday, Lutnick told Fox Business. He added that tariffs would likely land “somewhere in the middle,” with Trump “moving with the Canadians and Mexicans, but not all the way.” Meanwhile, China boosted its budget deficit to the highest in 30 years as it battles deflation, a property crash and now a trade war with the US. Policy makers also set an inflation goal of 2%, down from a longstanding 3% target. The yuan weakened slightly on the announcements. The NPC numbers came in-line with expectations and the lack of surprises is good, said Siguo Chen, a portfolio manager at RBC BlueBay Asset Management. For 2025, as long as China doesn’t have any policy surprises, it’s “good for China market,” and the rally in stocks will hold,  she said.  “The swing factor is Trump’s announcements, even for China,” she said. Elsewhere, the Bank of Japan Deputy Governor Shinichi Uchida signaled that the benchmark interest rate remains on a gradual upward path, in remarks that may quell speculation of an early move.
On the corporate front, Blackrock Inc. led led one of the biggest acquisitions of the year in a deal that marked both the firm’s expanded reach in infrastructure and a win for Trump, who had raised concerns over control of key ports near the Panama Canal. CK Hutchinson shares jumped as much as 25% in Hong Kong on Wednesday, the most in 27 years. In commodities, oil extended its decline and gold steadied near a record high. Bitcoin swung between gains and losses.  US After Hours AVAV -17.5%, CRWD -9.6%, BOX -6.7% lower on earnings; SWIM +18.3%, CTOS +7.7%, FLUT +1%, ROST +1% higher on earnings

Nikkei Hang Seng CSI Shanghai Shenzen

Eur$ CNH CNY JPY GBP CHF RUB TRY WTI$ Gold BTC ETH

S&P Nasdaq EuroStoxx FTSE Dax SMI


Macro :
- Ontario to Impose 25% Export Tax on Power to Three US States
- JPMorgan Traders Turn Glum on US Stocks, Expecting Tariff Pain

Keep an eye on :
- ADS GY : Adidas 2025 Operating Profit Forecast Misses Estimates (1)
- AMZN US : Amazon’s AWS Forms New Group Focused on Agentic AI: Reuters
- ANTIN FP : Antin Assets Under Management EU33.3B Vs. EU31.1B Y/y
- ARCAD NA : Arcadis CFO Duperat-Vergne to Step Down on May 31
- ASML NA : ASML Nominates Karien Van Gennip to Supervisory Board
- ATO FP : Atos FY Operating Margin 2.1% Vs. 4.4% Y/y
- BAVA DC : Bavarian Nordic Maintains 2025 Revenue Forecast
- BAYN GY : Bayer Sees 2025 Adjusted Ebitda EU9.5B to EU10B, Est. EU9.53B
- BBVA SM : *BBVA WON'T BE REQUIRED TO SELL OPS TO BUY SABADELL: EXPANSION
- 1 HK : *CK HUTCHISON ADRS POST RECORD 17% GAIN AFTER PANAMA PORT DEAL
- CPR IM : Campari FY Adjusted Ebit Beats Estimates
- DIS US : Disney Cuts 6% of ABC Network and Entertainment TV Workforce
- EVK GY : Evonik Sees 2025 Adjusted Ebitda EU2B to EU2.3B, Est. EU2.16B
- FXPO LN : Ukraine Agency to Take Oligarch’s Stake in Ferrexpo’s Core Asset
- FNTN GY : Freenet Sees 2025 Free Cash Flow EU300M to EU320M, Est. EU306.9M
- G IM : UniCredit May Boost Generali Stake to Close to 10%: Sole
- GTT FP : GTT Gets Order for Tank Design for Two New LNG Carriers
- ICOS IM : Intercos FY Revenue EU1.06B Vs. EU988.2M Y/y
- IMCD NA : IMCD FY Revenue Meets Estimates
- SDZ SW : Sandoz Group Sees 2025 Core Ebitda Margin About 21% (1)
- SCR FP : Scor 4Q Net Income Beats Estimates
- S92 GY : SMA Solar Sees 2025 Ebitda EU70M to EU110M
- SMCP FP : SMCP Group Founders Plan to Buy Back as Many as 675,000 Shares
- STLN SW : Six Approved Delisting of Swiss Steel Shares From June 6
- TEG GY : TAG Immobilien Places €332m Convertible Bonds
- TSLA US : Commerce to Overhaul 'Internet for All' Plan, Expanding Starlink Funding Prospects -- WSJ

>>> US After Hours Summary: AVAV -17.5%, CRWD -9.6%, BOX -6.7% lower on earnings

After Hours Summary: AVAV -17.5%, CRWD -9.6%, BOX -6.7% lower on earnings; SWIM +18.3%, CTOS +7.7%, FLUT +1%, ROST +1% higher on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: SWIM +18.3%, CTOS +7.7%, ATRO +7.7%, TXO +6.4%, EOLS +3.1%, CRDO +1.3%, FLUT +1%, ROST +1% (also increases dividend), INGM +0.8% (also initiates dividend; also $75 mln share repurchase plan in connection Imola JV), CHPT +0.5%

Companies trading higher in after hours in reaction to news: GOGL +5.9% (CMBT acquires stake in GOGL), CIFR +4.8% (February operational update), ACI +4.5% (to join S&P MidCap 400), MULN +4.2% (stock offering by selling shareholders), MRNA +3.6% (CEO bought $5 mln in shares), SAGE +3.1% (CMO to step down), EOSE +2% (names new CFO), FLG +1.7% (to delay 10-K filing), SOUN +1.4% (to delay 10-K filing), AOSL +1.4% (Exec Chairman Dr. Mike F. Chang resigned), COKE +0.8% (approves 10-for-1 stock split), JPM +0.8% (files $150 bln mixed shelf securities offering), GOOG +0.7% (urges DOJ to reverse course on breaking up co, according to Bloomberg), CDNS +0.6% (SVCO acquires Process Proximity Compensation product line of CDNS), NDAQ +0.6% (Feb volume data), FIP +0.4% (to delay 10-K filing), WH +0.1% (increases dividend), XPO +0.1% (reports Feb LTL operating metrics)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: AVAV -17.5%, CRWD -9.6%, BOX -6.7%

Companies trading lower in after hours in reaction to news: AJG -3.1% (to acquire Woodruff Sawyer), ED -1.7% (to offer 6.3 mln shares), LOT -1.6% (files $1.4 bln mixed shelf securities offering), MRVI -1.4% (to delay 10-K filing), AIR -0.4% (signs distribution and license agreement for PW4000 engine platforms), BNTX -0.2% (FDA places clinical hold on IND application), LOB -0.1% (to delay 10-K filing), CMBT -0.1% (CMBT acquires stake in GOGL), CGAU -0.1% (names new COO)

>>> Europe : Brokers Upgrades & Downgrades - 5th of March 2025

>>> Up
* Acerinox Raised at Jefferies on Product Mix, Geographic Exposure
* AUTO1 Raised to Outperform at Oddo BHF; PT 28 euros
* Barclays Raised to Outperform at BNPP Exane; PT 370 pence
* Fresnillo Raised to Buy at Banco BTG Pactual; PT 1,000 pence
* Mosaic Raised to Equal-Weight at Barclays; PT $27
* Tomra Raised to Hold at Nordea

>>> Down
* Deutsche Telekom Cut to Hold at HSBC; PT 36 euros
* H&M Cut to Hold at HSBC; PT 145 kronor
* Haleon Cut to Hold at HSBC; PT 420 pence
* Hexagon Cut to Hold at Stifel; PT 130 kronor
* Just Eat Takeaway Cut to Neutral at Citi; PT 20.30 euros
* NatWest Cut to Neutral at BNPP Exane; PT 555 pence

>>> Initiation
* ABB Rated New Outperform at Haitong Intl; PT 64.47 Swiss francs
* BioNTech ADRs Rated New Buy at Clear Street; PT $164
* Moonpig Rated New Outperform at RBC; PT 310 pence

>>> Call
* Subsea 7 Shares Upgraded as Barclays Flags ‘Attractive Story’

>>> Stoxx 600 Pre-Market Indications

  • Hochtief (HOT TH) +11%
    • Germany Abandons Fiscal Shackles to Transform Europe’s Defenses
  • Dassault Aviation (DAU0 TH) +8.6%
  • Wienerberger (WIB TH) +6.3%
  • Thales (CSF TH) +6.3%
  • Rheinmetall (RHM TH) +5.8%
  • Heidelberg Materials (HEI TH) +5.4%
  • Rolls-Royce (RRU TH) +4.2%
  • Airbus (AIR TH) +3.9%
  • Leonardo (FMNB TH) +3.7%
  • Saab (SDV1 TH) +3.6%
  • TotalEnergies (TOTB TH) -1.1%
  • Freenet (FNTN TH) -1.7%
  • Adidas (ADS TH) -3.6%
    • *ADIDAS SEES 2025 OPER PROFIT EU1.7B TO EU1.8B, EST. EU2.04B

>>> TradeGate Pre-Market Indications

DAX:
  • Rheinmetall (RHM TH) +6.1%
    • Germany Abandons Fiscal Shackles to Transform Europe’s Defenses
  • Heidelberg Materials (HEI TH) +5.7%
  • Airbus (AIR TH) +4%
  • Daimler Truck (DTG TH) +2.9%
  • Continental (CON TH) +2.7%
  • Adidas (ADS TH) -3.2%
    • *ADIDAS SEES 2025 OPER PROFIT EU1.7B TO EU1.8B, EST. EU2.04B
MDAX:
  • Bilfinger (GBF TH) +12%
  • Hochtief (HOT TH) +12%
  • Hensoldt (HAG TH) +11%
  • Thyssenkrupp (TKA TH) +5.9%
  • Bechtle (BC8 TH) +4.3%
  • Evonik (EVK TH) +2.1%
  • Lufthansa (LHA TH) +1.3%
  • Evotec SE (EVT TH) +1.2%
  • Puma (PUM TH) +0.8%
    • Adidas Sees Higher Profits This Year on Retro Sneakers Boom
SDAX:
  • RENK Group AG (R3NK TH) +11%
    • Germany Abandons Fiscal Shackles to Transform Europe’s Defenses
  • Vossloh (VOS TH) +6.8%
  • SFC Energy (F3C TH) +5.3%
  • Deutz (DEZ TH) +5.2%
  • Kontron (KTN TH) +4.6%

The Information : DeepSeek Spurs Black Market Demand for Nvidia Gaming Chips in

DeepSeek Spurs Black Market Demand for Nvidia Gaming Chips in China

The Takeaway
• Chinese companies are using Nvidia gaming chips to deploy DeepSeek
• Blackmarket price of Nvidia’s newest gaming chip has soared 150%
• Nvidia CEO Huang said DeepSeek was Nvidia’s most important customer in China

When DeepSeek’s success in developing competitive artificial intelligence models at a low cost prompted a $750 billion sell-off in Nvidia shares in late January, Nvidia CEO Jensen Huang wasn’t worried. He told some employees a few days later that DeepSeek had just become Nvidia’s most important customer in China, since any progress in AI will only increase demand for the company’s chips, according to a person who heard his remarks.

Demand for Nvidia chips in China has been soaring in the last several weeks, but not necessarily in the way Huang predicted. DeepSeek’s skyrocketing popularity has boosted demand for Nvidia’s gaming chips in the underground market as tech firms realize they can run DeepSeek’s models at a fraction of the price of AI chips, according to five chip smugglers.

The black market price for Nvidia’s latest and most powerful gaming chip, RTX 5090, has jumped 150% to more than $5,000 in recent weeks, according to the smugglers, compared to the chip’s $2,000 sticker price. Even at $5,000 apiece, the price is a sixth of the normal black market price for one of Nvidia’s most popular AI chips currently in use, the H100.

The episode is a reminder of the constantly shifting tactics used by buyers in the illicit market for Nvidia’s chips in China, where U.S. export controls ban purchase of the company’s most cutting-edge chips. Tech startups and universities have been buying Nvidia’s AI chips on the black market for more than a year to get around the export bans, using chip smugglers operating out of Singapore, Malaysia and Japan.

But the smugglers have lately shifted their attention to Nvidia’s gaming chips, responding to growing demand for consumer products that can run DeepSeek models, which don’t require the high-end AI chips.

To be sure, demand for Nvidia’s AI chips also surged after DeepSeek’s models went viral. China’s internet giants significantly increased their orders for less powerful Nvidia chips that U.S. regulations allow to be sold to China, according to five people with direct knowledge of the chip procurement. But orders for those chips placed now won’t be delivered for at least two quarters.

Universities, tech startups, and technology departments of state-owned enterprises meanwhile have turned to Nvidia gaming chips, which are cheaper and have the necessary computing power for DeepSeek model reasoning. And they’re available on the black market.

In January, for instance, a tech company in China’s northern Hebei province announced plans to invest approximately $2.6 million in an AI reasoning computing facility comprising initially only Nvidia gaming chips.

Meanwhile, in early February, a research team at China’s prestigious Tsinghua University announced that in collaboration with Chinese startup Approaching.AI they had managed to run DeepSeek’s full-powered models on just one Nvidia gaming chip.

Some other Chinese tech companies are running servers using eight modified Nvidia gaming chips instead of the standard eight AI chips, according to two smugglers and an engineer involved in their construction. These servers significantly lag behind regular Nvidia AI servers in performance, but their affordable pricing and quick availability have made them quite popular in China.

This isn’t the first time Chinese companies have switched to Nvidia’s gaming chips for AI work in response to U.S. export bans, although the surge in gaming chip prices in the black market is unusual.

It’s unclear whether Nvidia’s management is aware that its gaming chips are increasingly used as AI reasoning chips in China, but some of its employees in China certainly are. A couple of Nvidia employees visited an AI studio in China this month, witnessed how an engineer assembled an AI server with eight of Nvidia’s gaming chips and gushed over the craftsmanship showcased in the process, according to the engineer who did the assembly.

An Nvidia spokesperson said gaming cards are not viable for use in data center computing clusters for AI because the products are “designed, manufactured and marketed for individual gamers and consumers.”

Gaming chips are primarily designed for rendering graphics in videogames, but their powerful processing capabilities and architecture make them capable of handling AI tasks.

Before Nvidia developed AI-specific chips, academics and researchers in the early 2010s used the company’s graphics processing units designed for image processing to perform machine-learning tasks.

Just as it does with AI chips, Nvidia uses authorized distributors to sell its gaming chips rather than selling them directly. Distributors often sell some chips to other dealers, according to the five chip smugglers. Nvidia said its gaming chips are sold in compliance with U.S. export control laws. But its layered distribution network can make it difficult for the company to track the smuggling of its chips into China for use in AI data centers.

Gaming chips used to make up nearly half of Nvidia’s revenue until the debut of ChatGPT in late 2022 fueled demand for AI data center chips. But the share of Nvidia’s revenue gaming chips comprise has gradually declined, amounting to less than 10% in the quarter ending on January 26.

These chips typically feature less memory than dedicated AI chips, as they are primarily designed for gaming rather than large-scale AI tasks. To bridge the gap, many dealers in China have resorted to salvaging usable storage modules from older-generation gaming chips and incorporating them into the newer units, said two of the five gaming chip dealers.

This process enhances the storage capacity and data-handling capabilities of the modified chips, enabling them to run larger AI models more effectively.

FT : BlackRock to buy Panama Canal ports after pressure from Donald Trump

BlackRock to buy Panama Canal ports after pressure from Donald Trump
Deal worth $22.8bn involves sale of bulk of ports owned by Hong Kong-based conglomerate CK Hutchison

BlackRock has agreed to buy two major ports on the Panama Canal from their Hong Kong-based owner as part of a $22.8bn deal, following pressure from Donald Trump over alleged Chinese influence at the vital waterway.

Under the agreement, the ports’ Hong Kong-based owner CK Hutchison would sell the business to a consortium including BlackRock, Global Infrastructure Partners and Terminal Investment Limited, according to a company statement on Tuesday. The group would acquire a 90 per cent stake in the company that owns and operates the two ports in Panama.

Trump has frequently alleged that “China is running the Panama Canal”, and rattled Panama when he threatened earlier this year to “take it back” under American control. The Trump administration has also demanded Panama reduce Chinese influence at the canal, claiming Beijing’s involvement in the ports had violated a treaty concerning its neutrality.

The deal announced on Tuesday also includes an 80 per cent stake of CK Hutchison’s ports subsidiaries, which run 43 ports in 23 countries, including in the UK and Germany. It also runs ports in south-east Asia, the Middle East, Mexico and Australia.

The remaining 20 per cent stake is held by port operator PSA, which is owned by Temasek, the Singapore sovereign wealth fund.

CK Hutchison said it expected to receive cash in excess of $19bn from the deal, a figure that includes repayment of some shareholder loans. CK Hutchison’s market capitalisation is HK$148bn ($19bn).

Trump’s election victory last November and his calls for the US to retake control of the canal prompted CK Hutchison to consider the sale, sparking a short and intense period of negotiations for the ports, according to people briefed on the discussions.

“When President Trump won and he started making noise about annexing Canada and Greenland and Panama, the pressure was put on the Panamanians,” one person familiar with the deal said. The person added that CK Hutchison “realised that it was a political headache and they wanted to do something”.

To navigate the potential political fallout, BlackRock chief executive Larry Fink briefed senior leaders in the Trump administration, including the president, to secure their backing for the takeover, two people briefed on the matter said. One of the people added that the consortium would not have gone forward with its bid if they believed the US government would not support the deal.

Controlled by Hong Kong’s richest man Li Ka-shing and his family, CK Hutchison has a portfolio of ports, retail, telecoms and other infrastructure. Ports operations made up about 9 per cent of CK Hutchison’s total revenue of HK$461.6bn in 2023.

The canal has become a flashpoint in Trump’s first weeks in office, as the US president looks to expand the country’s borders and take control of infrastructure assets — roiling allies and countries that had profited from decades of growing free trade.

The deal with BlackRock comes after the asset manager’s acquisition of GIP, which helped make the firm a force in infrastructure investing.

The strategically important waterway is run by the Panama Canal Authority, an arm of Panama’s government. It was built by American engineers and run by the US from its opening in 1914 until a treaty in 1977 agreed a staged handover to Panama, which was completed in 1999.

Hong Kong-based Hutchison Ports, one of the world’s biggest operators of container terminals, has managed the ports at either end of the canal since 1997 under concessions from Panama’s government.

The facilities have often attracted political comment from US politicians who have alleged that CK Hutchison’s role means China in effect controls the canal.

The facilities mainly operate as “trans-shipment” ports where containers are moved between ships transiting the canal and smaller “feeder” ships shuttling to destinations around the Caribbean and the Pacific coast of South and Central America.

CK Hutchison arranged a new concession to keep operating the ports for another 25 years as recently as 2022.

WSJ : Commerce to Overhaul ‘Internet for All’ Plan, Expanding Starlink Funding P

Commerce to Overhaul ‘Internet for All’ Plan, Expanding Starlink Funding Prospects
Agency plans changes that will make Elon Musk’s satellite-internet service eligible for more rural broadband funding

The Commerce Department is examining changes to a $42.5 billion Biden-era program aimed at expanding internet access around the country with new rules that will make it easier for Starlink, Elon Musk’s satellite-internet service, to tap in to rural broadband funding, said people familiar with the plans.

Commerce Secretary Howard Lutnick has told staff he plans to make the grant program “technology-neutral,” the people said. That change will free up states to award more funds to satellite-internet providers like Starlink, rather than mainly to companies that lay fiber-optic cables, to connect the millions of U.S. households that lack high-speed internet service.

Republicans have said the Broadband Equity, Access and Deployment Program, created by the 2021 infrastructure bill, has moved too slowly and is bogged down by unnecessary rules. Those rules effectively said states could only fund alternative technologies such as satellite in areas where it wasn’t feasible or cost-effective to lay fiber cables.

The potential new rules could drastically increase the share of funding available to Starlink. Under the BEAD program’s original rules, Starlink was expected to get up to $4.1 billion, said people familiar with the matter. With Lutnick’s overhaul, Starlink, a unit of Musk’s SpaceX, could receive $10 billion to $20 billion, they said.

Representatives for the Commerce Department and Starlink didn’t immediately respond to a request for comment Tuesday.

The overhaul could be announced as soon as this week, possibly without some details in place, the people said. Following any changes, states may have to rewrite their plans for how to spend their funding from the program, which could delay the implementation.

Lutnick told staff he plans to do away with other BEAD program rules, including some related to climate impact and sustainability, as well as provisions that encouraged states to fund companies with a racially diverse workforce or union participation, the people said.

The program requires internet-service providers that receive funding to offer affordable plans for lower-income customers. Lutnick has told staff he is considering reducing those obligations, the people said.

Arielle Roth, Trump’s nominee to lead the Commerce Department bureau that oversees the internet-access program, has been critical of the rules governing it—and of the bureau itself.

Roth, speaking as a policy director on the Senate Commerce Committee under Sen. Ted Cruz (R., Texas), said last year that Congress had created the program “in a technology-neutral manner,” but that the bureau, the National Telecommunications and Information Administration, “imposed extreme tech bias in favor of fiber.” She also said the bureau pushed a “woke social agenda” on the program.

Under Biden, the program favored fiber because the bureau thought it provided more reliable service and more durable infrastructure than other technologies.

Starlink has more than 7,000 satellites orbiting Earth. The company says it serves more than five million homes, businesses and vehicles around the world, including many in rural America. Despite its high price tag—a dish costs several hundred dollars, plus a $120 monthly service fee—Starlink has gained a loyal following because it works in areas where fiber service isn’t available.

Many broadband providers worried the Musk-led Department of Government Efficiency would eliminate or reduce the program’s funding. Given the overhaul, fiber broadband providers may not benefit from it as much as they expected because non-fiber technologies are poised to receive more funding than before.

Starlink lobbied the Commerce Department to change the program’s rules last year but halted its lobbying after Trump took office, said people familiar with the matter.

WSJ : BlackRock Strikes $23 Billion Deal for Ports on Both Sides of Panama Canal

BlackRock Strikes $23 Billion Deal for Ports on Both Sides of Panama Canal
A consortium of investors is buying a majority stake in the ports from CK Hutchison

A consortium of investors led by BlackRock has agreed to buy majority stakes in ports on both sides of the Panama Canal from CK Hutchison for $22.8 billion, the companies said Tuesday.

The deal would bring the key ports under American corporate ownership, from Hong Kong-based CK Hutchison. The Panama Canal is controlled by Panama, but foreign-owned ports on either side have been flagged as a threat by the Trump administration.

BlackRock has briefed the Trump administration and Congress on the deal, said a person familiar with the matter.

“China is operating the Panama Canal, and we didn’t give it to China,” Trump said in his inaugural address, referring to the 1977 treaty that handed control of it to Panama.

American opposition to the current ownership structure centers on concerns China could use the ports for military purposes, including monitoring of ship movement. Panamanian officials, and several former U.S. military officials, have said that the Chinese facilities didn’t represent a military threat or breach the canal’s neutrality.

The U.S. built the Panama Canal, which opened in 1914, and relinquished it to Panama in late 1999 under a treaty negotiated more than 20 years earlier with then-President Jimmy Carter. Trump has long said the deal was bad for the U.S. and has complained about the fees Panama charges and Chinese infrastructure built up along the waterway.

BlackRock, its new infrastructure arm Global Infrastructure Partners, and Geneva-based Terminal Investment agreed to acquire a 90% interest in Panama Ports. The company owns and operates the ports of Balboa and Cristobal in Panama. The consortium also agreed to buy CK Hutchison’s controlling interest in 43 other ports in 23 countries.

If completed, the BlackRock deal could go a long way toward easing concerns about China’s influence over the canal.

CK Hutchison said that the sale was part of a “competitive process in which numerous bids and expressions of interest were received.”

“I would like to stress that the transaction is purely commercial in nature and wholly unrelated to recent political news reports concerning the Panama Ports,” said Hutchison co-managing director Frank Sixt.

In acquiring GIP last year, Chief Executive Larry Fink bet that private infrastructure assets would help drive his firm’s next wave of growth. GIP operates energy, transportation, and waste and water companies around the world, along with London Gatwick Airport, U.S. natural-gas pipelines and data centers.

The CK Hutchison deal is the largest-ever infrastructure acquisition for BlackRock or GIP.