Key Takeaways
- J.P. Morgan (JPM) has increased its price target for Applied Materials Inc. (AMAT) to $220 from $210, signaling continued confidence in the semiconductor equipment sector.
- China's economy is experiencing a significant slowdown, with Q2 GDP growth projected at 5.1% and persistent deflationary pressures exacerbated by ongoing trade strains and a prolonged property slump.
- China has tightened rare earth exports, including a halt on seven key elements and magnets, impacting Western defense and technology sectors and causing price surges of at least 5x.
- India and the United States are set to hold two crucial defense meetings this month to fast-track arms deals, focusing on expediting engine deliveries for fighter jets and other procurement projects.
Semiconductor Outlook: Applied Materials Price Target Raised
J.P. Morgan (JPM) has adjusted its price target for Applied Materials Inc. (AMAT), raising it to $220 from $210. This upward revision suggests a positive outlook from the investment bank on the semiconductor equipment manufacturer, despite previous adjustments. Earlier this year in May, J.P. Morgan had actually cut its target for Applied Materials to $210 from $240, citing projected weaker demand in the second half of 2025 due to tariff and trade issues impacting the broader semiconductor industry. The latest move indicates a renewed or strengthened confidence in the company's prospects.
China's Economic Headwinds Intensify
China's economy continues to face significant challenges, with a notable slowdown observed in the second quarter of 2025. The nation's GDP growth is projected at 5.1% year-on-year for Q2, a decline from 5.4% in Q1. This deceleration is primarily attributed to ongoing trade tensions, particularly with the United States, and a prolonged property slump that has dampened domestic demand.
Deflationary pressures are also a persistent concern. Producer prices in June fell at their fastest pace in nearly two years, and consumer prices remained flat in July after four consecutive months of deflation. Exports to the U.S. plunged 34% in May, further highlighting the impact of trade strains. In response, Beijing is reportedly considering a supplementary budget of 0.5–1 trillion yuan (approximately $69.7 billion-$139.5 billion) to stimulate the economy. Analysts forecast China's overall GDP growth for 2025 to cool to 4.6%.
Strategic Resource Control: China Tightens Rare Earth Exports
In a move with significant geopolitical implications, China is tightening its control over rare earth exports, particularly targeting foreign stockpiling. The restrictions are already causing delays in production for Western defense and technology companies, with one U.S. drone-parts supplier reporting delays of up to two months. This has led to price surges for certain rare earth materials, increasing by at least five times.
China, which accounts for approximately 90% of the world's rare earth supply, has halted shipments of seven critical rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—along with magnets made from them, since April 4, 2025. Exporters are now required to obtain licenses from the Ministry of Commerce, a process that can take weeks or months, with military application approvals often delayed or denied. U.S. Trade Representative Jamieson Greer stated that talks regarding these critical minerals are "about halfway there," indicating ongoing negotiations to stabilize supply flows.
India-US Defense Cooperation on the Fast Track
India is set to host two crucial defense engagements with the United States this month, aimed at fast-tracking arms deals and deepening strategic ties. These meetings include a visit from a high-level U.S. defense policy team in mid-August, followed by a working-level 2+2 Intersessional Dialogue towards the end of the month.
A key focus of these discussions is expediting the delivery of F404 engines from General Electric (GE) for India's Tejas Mk-1A fighter jets. While initial deliveries faced significant delays, GE has committed to a new schedule of monthly deliveries, increasing to two per month after October, with a follow-on order reportedly close to finalization. Talks will also cover the more powerful F414 engines for India's advanced fighter jet programs, the Advanced Medium Combat Aircraft (AMCA) and Tejas Mk2. Additionally, the stalled acquisition of six additional P-8I long-range maritime patrol aircraft for the Indian Navy is expected to be revisited. The 21st edition of the joint military exercise 'Yudh Abhyas' is also scheduled to take place in Alaska later this month, further underscoring the robust defense partnership.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.