FT News Briefing India’s middle-class debt crisis
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Apr 16, 2025 Nvidia faces a $5.5 billion hit due to U.S. restrictions on AI chip exports to China. Meanwhile, the junk bond market is in turmoil, impacting financing for riskier firms. In India, the middle class grapples with a rising debt crisis, as household debt balloons from 35% to 43% of GDP since 2020. Late payments on personal loans are rising, threatening overall economic growth. This financial squeeze highlights the alarming trend of increasing borrowing costs and aggressive debt collection tactics.
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NVIDIA's Export Control Impact
- NVIDIA expects a $5.5 billion hit due to new US export controls on AI chips to China.
- These H100 chips, though less powerful, are in high demand, impacting NVIDIA's share price.
Junk Bond Market and Private Equity
- The US junk bond market, tied to riskier companies, has weakened since President Trump's trade war began.
- This impacts private equity's dealmaking and companies' ability to raise funds or refinance debt.
Junk Bond Market Slowdown
- A pause in the junk bond market can impact dealmaking and potentially lead to higher borrowing costs.
- Investors' risk aversion could signal a higher probability of recession and increased defaults.