Nvidia's investment in MediaTek boosts the tech sector; MediaTek shares rise 9.9%, Middle East tensions weigh on Asian bond markets

Nvidia’s $3.5 billion investment in MediaTek has driven the latter’s stock price to its daily limit, leading the rally in Asia-Pacific's technology sector. Meanwhile, escalating geopolitical tensions in the Middle East have pushed oil prices higher and put pressure on Asian bonds; investor sentiment has turned cautious amid inflation concerns and expectations of rate hikes.

On Tuesday, MediaTek surged 10% in the Taiwan stock market, reaching the upper daily limit. Nvidia’s investment, conducted through convertible bonds, marks its largest ever direct investment outside the United States and is widely seen as a strong endorsement of MediaTek’s strategic transformation towards AI chips.

At the same time, the sudden escalation in the Middle East has cast a shadow over global markets. Brent crude rose further in Asian morning trading to above $91 per barrel, as the U.S. and Iran launched strikes against each other for the first time in about a month, dampening prospects for a normalization of shipping traffic through the Strait of Hormuz in the Persian Gulf.

Rising oil prices have exacerbated inflation worries. Coupled with Fed Chair Waller reiterating the anti-inflation stance at the Jackson Hole meeting, the money markets have increased their bets on a rate hike in September, putting pressure on Asian government bonds as yields in Japan, Australia, and New Zealand followed U.S. Treasuries higher.

Wallstreetcn reports that on Monday, MediaTek announced the completion of a $3.9 billion US dollar-denominated convertible bond issuance, with Nvidia subscribing to $3.5 billion of it. Alphabet and other investors also participated, though the amounts were not disclosed.

This move by Nvidia is its largest ever direct investment outside the US, widely interpreted by the market as strategic recognition of MediaTek’s transformational path towards AI semiconductors. Singapore's Amundi Wealth Management Chief Strategist Francis Tan commented:

This investment is a major strategic endorsement for MediaTek and further accelerates its transition from being known mainly for smartphone chips to a broader AI semiconductor company.

MediaTek CEO Rick Tsai said that with Nvidia as a shareholder, the company's AI chip business is expected to accelerate its growth.

MediaTek had previously set its revenue target for the custom AI chip business this year at $2 billion and plans to capture 15% of the $80 billion market by 2027.

Earlier this year, MediaTek reached a partnership with Google's Alphabet. Some analysts speculate that SpaceX could be its next AI client.

Asia’s bond market came under broad pressure on Tuesday. The 10-year US Treasury yield rose 2 basis points to 4.77%, its highest since January 2025.

Japan’s 10-year government bond yield rose to 2.965%, having touched a 30-year high in the previous session, now only 6 basis points away from the critical 3% level. Australia’s 10-year yield climbed 7 basis points to 5.16%.

As for the yen, USD/JPY hovered close to 159.67. The yen has given back over half of its gains accumulated during July’s record intervention, and the psychological barrier at 160 has reignited market vigilance regarding a possible return of official intervention.

According to NHK, US Treasury Secretary Wally Adeyemo stated in a meeting with Japan’s Finance Minister and Bank of Japan Governor Kazuo Ueda that Japan needs to further raise rates.

On the monetary policy outlook, attention is focusing on Friday’s release of the US August non-farm payroll data. JPMorgan’s Andrew Tyler described the jobs data as “crucial”, but said the Consumer Price Index to be announced on September 11 will be even more decisive because Waller considers the US economy to be at full employment.

He is taking a “tactically cautious” stance on US stocks in the coming weeks, but believes the overall economic data and earnings backdrop remain supportive. Chris Larkin from Morgan Stanley’s E*Trade business also warned that if jobs data surprises to the upside, the market may interpret it as bad news since it would reinforce rate-hike expectations.

In energy markets, the fresh escalation in the Middle East is the main force behind higher oil prices.

The US military struck an island in the Strait of Hormuz, while Iran retaliated against the UAE and Jordan—marking the first mutual exchanges between the two sides in about a month.

The Strait of Hormuz is a key global oil shipping route; the current conflict has made prospects for normalized shipping even gloomier. Brent crude briefly rose above $91 per barrel intraday, and WTI crude climbed about 1% to $86.61 per barrel.

In precious metals, spot gold briefly rebounded about 0.5% to $4,460 per ounce before falling back 0.2% during the day.