⛏ This miner struck a nerve

What’s going on here?

Mining giant BHP reported some seriously disappointing results on Tuesday.

What does this mean?

Rewind to a year ago, and BHP was riding high, boasting its highest-ever annual profit, thanks to booming commodity prices. But this year’s not so wonderful – and the thorn in its side is China-shaped. See, the world’s biggest metals consumer is in an economic funk right now, particularly in its property sector. And that’s a big deal for BHP: after all, construction in China is steel-hungry, meaning the country’s usually a big buyer of BHP’s iron ore. And sure, India did offer a shoulder to cry on, with ambitious plans to more than double its own steel production. But in the end, slack Chinese demand, dwindling commodity prices, and climbing costs saw BHP’s earnings taking a 37% nosedive from last year, marking its lowest annual profit in three years.

Why should I care?

Zooming in: Not just a wooden nickel.

BHP’s fate echoes that of its rival, Rio Tinto. And with predictions that steel and iron ore demand will shrink further this year, it looks like the industry’s tough times are set to continue. But BHP isn’t just sitting around. The firm’s pivoting toward future-proof commodities like copper, potash, and nickel, betting big on population growth and the clean energy shift. It’s putting its money where its mouth is too, upping its investments in the space in the hopes that these ventures will soon account for half its total revenue.

The bigger picture: Sinking foundations.

China’s trying to jumpstart its property sector, but its policies haven’t yet translated into changes on the ground. And that makes sense: despite the slowdown, authorities have been slow to take any truly big steps to encourage building on a grand scale. And if they’re not careful, that hesitation could backfire – letting the property sector’s inertia slow the broader economy down even more.

What’s going on here?

Chinese internet giant Baidu reported some pretty impressive results on Tuesday.

What does this mean?

As the biggest search engine in the country, Baidu is essentially China’s answer to Google. And even as the broader economy’s taking its sweet time to get moving, online advertising is bouncing back – just take a look at Tencent’s recent numbers for proof of that. That’s great news for Baidu, given that a hefty portion of its revenue comes from digital marketing. In fact, the firm saw 15% growth in that segment last quarter, as businesses eagerly ramped up their ad campaigns during the post-lockdown reopening phase. That helped Baidu’s revenue grow at the fastest pace in two years. And that got investors – already impressed by the firm’s new AI offerings last week – sending shares up too.

Why should I care?

The bigger picture: Chipping away.

Of course, Baidu isn’t the only player with AI dreams, with the likes of Alibaba and Tencent trying to make inroads too. But whichever Chinese giant comes out on top, they all need one thing to make it happen: chips. And given the looming concerns that the US might tighten export controls, these giants aren’t taking any chances. In fact, recent reports showed a scramble among Baidu, ByteDance, Tencent, and Alibaba to secure high-performance chips from Nvidia. Collectively, they’ve already placed orders worth a whopping $5 billion, set for delivery in the coming years.

Zooming out: Twisting investors’ Arm.

Many are bullish on Arm riding the AI wave too, but the chip designer – fresh from filing for its stock market listing this week – isn’t without its share of investor skepticism. See, Arm just disclosed that a quarter of its revenue comes from China, warning that it’s particularly vulnerable to escalating tensions between China and the West. That kind of complication might just dampen the enthusiasm for the firm’s much-anticipated listing, which had been touted as the biggest blockbuster of 2023.