SharespectiveWall street, before your first coffee

Thu 3 Sep 2026 Issue 241

Hiring Cools, Hikes Don't Plus: Nvidia is close to paying US$14 billion for the website where open-source AI lives.

Good morning, and welcome to Thursday. American businesses added 38,000 jobs last month, the weakest hiring since January, and Wall Street responded by buying shares. That is less odd than it looks: what is bothering the Federal Reserve right now isn't employment, it's petrol-fed inflation, and one soft hiring number doesn't change that. The S&P 500 rose 0.46% and the Nasdaq Composite 0.45%, ending a three-day slide.

It helped that the two things doing the damage all week took the day off. Brent crude sat around US$95 a barrel instead of climbing again, and the US 10-year Treasury yield finished at 4.79%, exactly where it was on Tuesday. A day when the bond market does nothing at all now counts as good news.

Market snapshot

US levels are the official 4​pm New York close on Wednesday 2 September. The NZX 50 and ASX 200 are Wednesday's local closes, and currencies were taken at the end of Wednesday's New York session.

American employers added 38,000 jobs last month and the Fed is still weighing a rate rise

Payroll company ADP said private employers added 38,000 jobs in August, against forecasts nearer 47,000 and a revised 46,000 in July. It is the weakest reading since January, and the mix is worse than the headline. Education and health care added 45,000 and leisure and hospitality 16,000, while manufacturing shed 17,000 and professional services 16,000. Take out the part of the economy that hires regardless of the cycle and there isn't much left.

Why a weak jobs number doesn't settle it. In an ordinary cycle, hiring this soft would have traders betting on cuts. This is not an ordinary cycle. Inflation is running at 3.7% on the Fed's preferred measure, oil has jumped on strikes around the Strait of Hormuz, and Fed chair Kevin Warsh used his Jackson Hole speech to call the inflation figures concerning. Futures went from roughly a one-in-three chance of a September rise before that speech to two in three now. ADP is also only one payroll processor's estimate, and a patchy guide to the official count.

John Williams, who runs the New York Fed, told CNBC on Wednesday that the climb in long-term yields reflects a strong economy and heavy spending on AI datacentres rather than fear of inflation, and said the September call would come down to the data. He has reason to hedge: July's official payrolls fell by 23,000, and the two months before were revised down by a combined 103,000.

Nvidia is close to buying the place where open-source AI lives

Bloomberg reported on Wednesday that Nvidia is in advanced talks to buy Hugging Face for around US$12.9 billion, plus roughly US$1 billion to keep its staff, with a deal possible within days. Nothing is signed, and both companies declined to comment. Nvidia shares were up 4% during the session before closing 3.2% higher at US$224.41.

What Nvidia would actually be buying. Hugging Face, started in 2016, is the default place where developers publish and download open-source AI models — the ones anyone can run themselves rather than rent from OpenAI or Anthropic. It also sells computing time to run them. It turns over about US$150 million a year and was valued at US$4.5 billion three years ago, so the price plainly isn't about the revenue. The most Nvidia has ever paid for anything before this is the roughly US$6.9 billion it spent on Mellanox.

Nvidia sells the shovels, and would rather the gold rush stayed crowded. If AI narrows to a few enormous closed labs, those labs have both the money and the motive to design their own chips, which several already are. A healthy open-source layer keeps demand spread across thousands of smaller outfits renting or buying Nvidia hardware instead.

The Reserve Bank lifted the OCR to 2.75% and the share market went up anyway

The Monetary Policy Committee voted unanimously on Wednesday to raise the official cash rate by 25 basis points to 2.75%, as every major bank's economics team had picked. Annual inflation hit 4.1% in the June quarter, above the 1% to 3% band the Reserve Bank is meant to keep it inside, and most of the overshoot is imported fuel. The committee's case for moving now is that small steps taken early reduce the odds of larger ones later. The NZX 50 finished up 143.67 points, or 1.04%, at 13,930.57.

Why shares rose and the dollar fell. Both reactions are to the same sentence. The rise itself was fully priced, so the news was the tone, and the tone was careful — gradual, not predetermined, dependent on what comes next. Share investors heard a slower climb in borrowing costs and bought. Currency traders had positioned for something firmer and sold, knocking the kiwi about 0.7% lower to just under 59 US cents on the day its central bank tightened.

Australia went the other way. The ASX 200 fell 0.97% to a one-month low, its traders lifting bets that the RBA has more work to do when it meets at the end of the month.

Newsworthy numbers

Worth a read

Wrapping up

The European Central Bank decides on 10 September, with a 25 basis point rise to a 2.50% deposit rate about 87% priced. The Federal Reserve follows on 15 and 16 September. Before either, tonight brings US jobless claims, the July trade balance and the ISM services index, expected at 54.5 against 54.1 in July.

Broadcom's third-quarter results were due minutes after Wednesday's close. The line to find is AI semiconductor revenue, guided to about US$16 billion; the other is whether it lifts its target of more than US$100 billion of AI chip sales in the 2027 financial year, since declining to last quarter took 12.6% off the shares. Closer to home, Australia's July trade balance lands this morning, China's Caixin services PMI follows, and the RBA meets on 28 and 29 September.

The kiwi fell about 0.7% to leave USD/NZD at 1.7085, while the Australian dollar went the other way, USD/AUD easing 0.35% to 1.3941. The split is about what comes next: the Reserve Bank raised rates but sounded in no hurry to repeat it, while stronger Australian growth figures had traders pricing in more from the RBA.

Enjoy your Thursday. The Fed has two weeks to make up its mind.