Singapore Upgrades Full-Year Economic Outlook

SINGAPORE—Singapore’s economic outlook seems brighter, as resilience in external demand and a recovery in the key electronics sector helps guard against headwinds elsewhere, the trade ministry said as it adjusted the city-state’s growth forecast for the year.

The Singapore economy grew 2.9% in the second quarter from a year earlier, according to revised data from the Ministry of Trade and Industry released on Tuesday. That matched the advance estimate compiled in July and compared with growth of 3.0% in the first quarter.

For the first half of the year, growth averaged 3.0%, the data showed.

Taking into account the performance of the Singapore economy in the first half, as well as global and domestic economic factors, MTI updated its full-year growth forecast to 2.0% to 3.0% from 1.0% to 3.0%.

Expansion in the April-to-June period was driven mainly by the wholesale trade, finance & insurance, and information & communications sectors, the ministry said. The manufacturing sector—a key engine of the economy—shrank in the quarter, largely due to a sharp fall in the volatile pharmaceuticals segment, the data showed. On the bright side, electronics returned to growth, backed by strong demand for smartphones, PCs and AI-related chips, it added.

“Singapore’s external demand outlook is expected to be resilient for the rest of the year. However, downside risks in the global economy remain,” the MTI said.

How other global trading partners fare is key for the trade-reliant economy of Singapore, which is well-placed to benefit from the global tech cycle upturn but exposed to downturns abroad.

A potential headwind could come from a slight slowdown in the U.S. economy, where MTI expects consumption growth to ease as the labor market softens. Growth in other advanced economies like the European Union and Japan is tipped to pick up, however.

Among Singapore’s major trading partners in Asia, MTI sees a slight slowdown in China in the second half of the year as investment growth tapers but thinks the property market will stabilize as government support measures kick in, boosting consumer sentiment. Growth in key Southeast Asian economies is projected to pick up slightly in the second half of the year as domestic demand strengthens, aided further by recoveries in global electronics and tourism demand.

Risks that could put the brakes on Singapore’s economic momentum include geopolitical and trade conflicts, which could hurt business sentiment and drive up production costs. Disruptions to the global disinflation process meanwhile could lead to higher for longer rates and trigger market volatility, MTI said.

“Against this backdrop, Singapore’s manufacturing sector is expected to see a gradual recovery in the second half of the year,” MTI said, expecting electronics to recover strongly.

Singapore’s GDP grew 0.4% on a quarter-over-quarter seasonally adjusted basis in the second quarter, the revised data showed. That matched both the advance estimate for the quarter, and was steady from the 0.4% expansion seen in the first quarter.

Meanwhile, data in a separate release from Enterprise Singapore showed that the city-state’s total merchandise trade expanded by 10% on the year in the second quarter, surging from the 4.8% growth seen in the first quarter.

Non-oil domestic exports slid 6.4% in the second quarter from a high base a year ago, widening the 3.4% decrease seen in the previous quarter, the data showed. Shipments of pharmaceuticals dragged on the results, but electronics grew for the first time in eight quarters.

Enterprise Singapore expects total trade to be supported by high oil prices, and the electronics recovery in the latter half of the year to boost exports, driven by demand in AI servers and consumer devices. Key downside risks for the NODX forecast remain, including a weaker-than-expected recovery in the final months of the year.

“Taking the above into consideration, the 2024 growth forecasts are narrowed to +5.0% to +6.0% for total merchandise trade and to +4.0% to +5.0% for NODX, from the earlier forecasts of +4.0% to +6.0% for both,” it said.

Chip makers are fighting to assure investors that the artificial-intelligence boom is racing forward. Wall Street might not believe it until Nvidia’s NVDA -0.98%decrease; down pointing triangle Jensen Huang says so.

When Huang steps up to the mic for his company’s earnings call Wednesday, he will have the world’s attention. What he says about Nvidia’s present will preview the future of AI, dictate the path forward for a tech-crazed stock market and influence an American economy increasingly tethered to hopes that the boom won’t go bust.

The $5 trillion chip maker has provided the key building blocks for AI since the launch of ChatGPT in 2022 set off a race for dominance among OpenAI, Anthropic and established Silicon Valley giants. Now, as Nvidia backstops sprawling data-center projects and an exotic money pipeline to boost chip demand, the company’s influence is arguably bigger than ever.

But there are signs of trouble ahead. Political pushback to AI is growing. A bond selloff propelled borrowing costs to their highest levels in years. The hyperscalers that include some of Nvidia’s key customers—once cash-printing machines—are relying more on debt. OpenAI recently told investors its revenue rose by a tepid 18% in the second quarter while its losses deepened.

Nvidia is increasingly stepping in to shore up potential weak points across the market. Earlier this month, the company teamed up with six of Wall Street’s biggest firms on a $500 billion AI-financing plan, pledging to backstop lending to customers that can’t afford its chips otherwise. The chip maker last week also took a stake in Cloverleaf Infrastructure, which arranges power for data centers, and struck a $6 billion deal with startup Poolside aimed at developing a powerful open-weight AI model.

After watching shares in other chip makers and the so-called Magnificent Seven tech companies swing wildly in recent months, Wall Street is hoping Nvidia can beat expectations—again. The countdown is on.

“It’s kind of becoming more and more like the World Cup final than the Super Bowl at this point,” said Brian Mulberry, chief market strategist at Zacks Investment Management. “It’s just gotten to be that big.”

The company has smashed analysts’ earnings estimates for each of the 14 quarters since the AI boom kicked into high gear. Nvidia posted 210% annual growth in net income in its last three-month period, according to FactSet, making Wall Street’s 126% projection look pedestrian.

Expectations for a blowout second quarter have risen rapidly over the course of this year. All Nvidia will have to do to beat this target: outrun 95% annual earnings growth to more than $51.5 billion. Analysts project the chip maker will report record sales of $92 billion for the period, up from a forecast of $78 billion at the start of this year.

In July, big-tech earnings sparked volatility. Concerns about runaway capital spending spread across the sector after Alphabet’s and Tesla’s results, driving a $890 billion wipeout that contributed to the unwind of hedge fund Situational Awareness. Microsoft posted the largest one-day gain in market capitalization by any company, ever, after a quarter proving that it could still show investors the money. SpaceX rocketed higher after a record-breaking initial public offering, only to see $1 trillion in value evaporate.

Surging memory prices and borrowing costs have fueled fears that those and other companies will be unable to keep plowing more money into supplies including Nvidia chips. Shaia Hosseinzadeh, founder of OnyxPoint Global Management, has recently bought dips in AI-infrastructure stocks when Wall Street has strained to absorb massive debt issued by Silicon Valley.

“The macro data is really quite robust,” he said. “Of course, there’s a level at which everything breaks.”

Investors have kept pumping money into the AI trade despite concerns around chip consumers—and to the benefit of chip producers. That is why Nvidia’s outlook for semiconductor demand could send ripples through counterparts such as Micron Technology and Sandisk, developers of the data centers in which their chips reside, and a supply chain of power producers, contractors and other specialists that underpin the globe-spanning AI build-out.

“We joke internally that we’re all Nvidia analysts now,” said David Lefkowitz, head of U.S. equities at UBS Global Wealth Management.

The irony is that investors have tended to sell Nvidia stock immediately after blockbuster earnings, with shares falling each trading session after its four past quarterly reports. Some are betting that will be the case this time around, too.

The options market is pricing in a 5.3% swing, higher or lower, in Nvidia shares during the session following earnings, according to Option Research & Technology Services. That is higher than the 4.8% average move in Nvidia’s stock over the last 12 months after the company reports quarterly results.

In recent days, some of the most actively traded Nvidia options have been put contracts tied to the stock falling from its Friday value of $214.75 to $205 and $210 apiece, according to Cboe Global Markets data. Put options give the right to sell a stock by a set price and typically represent a bearish wager.

Many analysts remain optimistic. Frank Lee, global head of tech hardware and semiconductor research at HSBC Global Investment Research, recently raised his price target for Nvidia shares to $360 from $325, citing, among other things, Nvidia’s strategic partnerships with suppliers and its role as a top contributor to open-source AI.

Singapore Upgrades Full-Year Economic Outlook

The Singapore economy grew 2.9% in the second quarter from a year earlier

Nvidia’s earnings will test Wall Street’s confidence in the AI boom.