The trade war between the U.S. and China has driven Apple and Alibaba into each other's arms.

Unfortunately, that may not be a sign of deeper collaboration between the world's two biggest economies and their companies.

Apple had little choice in the matter. Beijing's cyberspace regulator requires Apple to work with a local company to develop AI services in the Chinese market. The U.S. tech giant has submitted its Apple Intelligence features -- developed with Alibaba -- for approval, The Wall Street Journal reported early Wednesday.

Investors appear to view this as a big win for Alibaba as the stock surged in Hong Kong.

But it could also benefit Apple, which has suffered a prolonged period of weak iPhone sales in the People's Republic amid competition from Huawei. Partnering with Alibaba will undoubtedly boost Apple's brand among Chinese consumers.

The absence of Apple Intelligence, which has not been rolled out in China, was given as a reason for the company's 11% fourth-quarter revenue drop in the country by CEO Tim Cook.

More broadly, though, it's another sign that the Chinese tech sector is on the rebound. The emergence of DeepSeek AI, and its apparently lower costs, briefly roiled U.S. tech stocks last month. However, the longer-term impact could provide a sustained boost for Beijing's tech companies.

The Hang Seng tech index has jumped 24% over the past month. In contrast, the tech-heavy Nasdaq 100 is up just 4% in the same period. Though U.S. tech stocks began that period from a position of far greater strength.

Beijing's biggest technology stocks are also less exposed to the impact of tariffs than other sectors, such as autos or steel makers, and could ride out any further escalation -- U.S. President Donald Trump imposed an additional 10% levy on Chinese goods earlier this month and Beijing retaliated with countermeasures.

The power dynamic may now be shifting and the U.S. tech sector's global dominance is under threat.

-- Callum Keown

***

Powell Back on Capitol Hill to Talk Economy, Monetary Policy

Federal Reserve Chair Jerome Powell will appear before the House Financial Services Committee today, right after the consumer price index for January is released. He is expected to reiterate a patient approach to adjusting interest rates amid evidence of a solid economy, a message he delivered in the Senate on Tuesday.

   -- With a significantly less restrictive policy stance and a strong economy 
      and labor market, "we do not need to be in a hurry" to adjust policy, 
      Powell told the Senate's Banking, Housing, and Urban Affairs Committee. 
      The Fed held rates steady last month. 
 
   -- Powell said officials want the Fed's annual "stress tests" of big banks 
      to remain resilient, and said they are strongly committed to the 
      integrity, efficacy, and resilience of the central bank's role in 
      processing payments for the U.S. government on behalf of Congress. 
 
   -- Banking Committee ranking member Sen. Elizabeth Warren (D., Mass.) urged 
      Powell to resist efforts by President Donald Trump and his government 
      efficiency head Elon Musk to take over the Fed's payment system, cut 
      large numbers of government workers, and gut agencies such as the 
      Consumer Financial Protection Bureau. 
 
   -- Powell continued to emphasize the Fed's independence, such as steering 
      clear of commenting on tariff policy. When Sen. Jack Reed (D., R.I.) 
      asked Powell what he would do if Trump tried to remove a Fed governor, 
      Powell said: "It's pretty clearly not allowed under the law." 

What's Next: Trump has issued an executive order giving Musk's Department of Government Efficiency more authority to slash the size of the federal workforce by restricting hiring. Defending his cuts during an Oval Office appearance on Tuesday, Musk said it was essential to reduce federal expenses.

-- Nicholas Jasinski and Janet H. Cho

***

U.S. Wants Most Advanced AI Chips Made in America

The Trump administration believes that excessive regulation of artificial intelligence or an overemphasis on AI safety just as it is poised to take off could hamper its potential to profoundly change the world. The U.S. wants to relax U.S. regulations to encourage manufacturing and innovation.

   -- Vice President JD Vance told the AI Action Summit in Paris that the 
      administration believes AI will have "countless revolutionary 
      applications" in economic innovation, job creation, national security, 
      healthcare, free expression, and beyond. He criticized European 
      governments for over-regulating American tech companies. 
 
   -- To safeguard America's advantage, the administration wants to make sure 
      that the most powerful AI systems are built in the U.S. with American 
      designed and manufactured chips, Vance said. About 90% of the world's 
      most advanced chips come from Taiwan Semiconductor Manufacturing Co. 
 
   -- Intel, the largest U.S. chip maker, received $8 billion from President 
      Joe Biden's administration to expand production, and is trying to become 
      a chip-making foundry for other semiconductor companies. 
 
   -- Although the Biden administration last month expanded restrictions on AI 
      chip exports, licensing approvals, or caps to over 120 countries beyond 
      China, Vance suggested that the Trump administration could allow AI 
      companies and AI chip makers like Nvidia to sell their products abroad. 

What's Next: Patrick Moorhead, CEO and chief analyst at Moor Insights & Strategy, expects Trump to pressure U.S.-based chip developers Nvidia, AMD, Broadcom, Marvell, Apple, and Qualcomm, which all use TSMC for their manufacturing capabilities, to do more with Intel. Vance's comments suggest chip makers could see fewer regulations.

-- Tae Kim and Janet H. Cho

***

BYD Takes EV War to Tesla With Smart Driving

BYD shares briefly hit their highest-ever level on Tuesday. The Chinese electric-vehicle maker is looking to undercut rivals such as Tesla by adding more self-driving features to a wider range of its cars.

   -- BYD has introduced its smart driving system The God's Eye, or Eye of God, 
      which will be available in most of its models and included as standard on 
      those priced over 100,000 yuan ($13,689). It's comparable with Ford 
      Motor's Blue Cruise, General Motors' Super Cruise, or Tesla's AutoPilot 
      and Full Self-Driving features. 
 
   -- Analysts at J.P. Morgan estimate that 40%-50% of BYD's domestic vehicle 
      sales this year will include autonomous-driving features, outpacing 
      rivals. That can drive market-share gains, they added. 
 
   -- BYD is the leading EV brand in China and sold 3.7 million passenger cars 
      last year in the country, up 37% from a year earlier. Global sales topped 
      4.2 million, up 41%. By comparison, Tesla's Chinese sales rose 9% to 
      around 660,000 cars. 

What's Next: Better features for BYD cars mean tougher competition in the EV sector for competitors, and investors took the Chinese company's announcement as a bad sign for its peers. U.S.-listed American depositary receipts of XPeng, NIO, and Li Auto fell 6.9%, 6.7%, and 4.9%, respectively, on Tuesday. Tesla shares slumped 6.3%.

-- Adam Clark and Al Root

***

Super Micro Sees Bright 2026 Results, But Near Term is Weaker

Super Micro Computer offered a worse-than-expected business outlook but sees far better than expected sales in 2026 as data center customers adopt direct-liquid cooling technology. The company is aiming to complete its regulatory filings for the June fiscal year and the September quarter by Feb. 25.

   -- The artificial-intelligence-server company said it had preliminary fiscal 
      second quarter sales of $5.6 billion to $5.7 billion and adjusted 
      earnings of 58 cents to 60 cents a share. It sees fiscal year 2025 
      revenue of up to $25 billion, which is lower than earlier projections, 
      but sees 2026 revenue of $40 billion. 
 
   -- It's been months of drama for Super Micro, which was the subject of a 
      scathing short-seller report in August that called its accounting into 
      question. Late in 2024, it received Justice Department and Securities and 
      Exchange Commission subpoenas related to those allegations. Super Micro 
      said it is cooperating. 
 
   -- It said none of its previously issued financial statements require a 
      restatement. The accounting firm Ernst & Young, said in October it 
      couldn't rely on Super Micro management's representations and didn't want 
      to be associated with leadership's financial statements, quitting as 
      auditor. 
 
   -- CEO Charles Liang said the $40 billion target for 2026 revenue could be a 
      conservative projection. It is hoping to ship more volume once its 
      allocation of Nvidia chips improves. Liang said Super Micro is positioned 
      to win more AI infrastructure design business based on Nvidia chips. 

What's Next: Super Micro's near-term outlook was also weak. Its guidance for the current quarter was for $5 billion to $6 billion in sales, versus the $5.92 billion estimate.

-- Tae Kim

***

Grocery Retailers Are Limiting Egg Purchases Amid Soaring Prices

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