A sell-off in global bonds is accelerating as Moody’s downgrade of U.S. credit rating and President Donald Trump’s tax bill has brought to fore investors’ fiscal concerns globally. Events such as credit rating downgrades or budgets that risk expanding deficits tend to bring fiscal concerns front and center of investors’ minds, forcing them to reprice long-end risk, said Rong Ren Goh, Portfolio Manager, Fixed Income, Eastspring Investments. While Trump was unable to sway GOP dissenters to support his broad tax bill that could drive U.S. debt higher by a projected $3 trillion to $5 trillion, it appears to have triggered a global bond rout. “Markets do not find Trump’s “big, beautiful tax bill” beautiful at all,” said Vishnu Varathan, a managing director at Mizuho Securities. “USTs were beaten up in an ugly sell-off.” The U.S. 30-year Treasury yield broke above the key 5% mark for the second straight day, breaching the level last reached in November 2023. It is currently holding at 5.088%. The benchmark 10-year Treasury yield has climbed over 15 basis points since the start of the week. The sell-off in Treasurys comes on the back of the exodus in American assets in April, and is largely owed to investors’ declining confidence in U.S. assets, said market watchers. When investors dumped U.S. Treasuries last month, they turned to bonds in Japan and Germany. This time, the Treasury sell-off is accompanied by investors exiting bonds across several major markets. Contagion effect — and more The sell-off in long-duration bonds in each market has been driven by distinct factors, with the common thread being a growing unease with worsening fiscal trajectories. “These concerns are prompting a reassessment of the term premium required to hold longer-dated bonds,” said Goh. Japan’s 40-year government bond yield hit a record high of 3.689% Thursday. The country’s 30-year government bond yield has also been hovering near all-time highs at 3.187%. The yield on Japan’s benchmark 10-year government bond has climbed 9 basis points to 1.57% so far this week. The rapid steepening of Japan’s government bond yield curve is owed to several reasons, but the key one is structural. Japanese life insurance companies, who used to buy long-term bonds in droves to comply with certain solvency regulations are no longer doing that, as they have largely met the regulatory criteria, according to Bank of America. Additionally, the Bank of Japan’s inclination to tighten its monetary policy, which collides with the Asian nation’s fiscal woes, also have a hand in fueling the bond sell-off, said Varathan. The sell-off in Japanese government bonds poses a bigger problem for U.S. sovereign debt. “By making Japanese assets an attractive alternative for local investors, it encourages further divestment from the U.S.,” George Saravelos, Deutsche Bank’s global head of FX strategy wrote in a note. German government bonds — known as bunds — are also being dumped. Yield on 30-year German debt are up over 12 basis points, while the 10-year yield is up over 6 basis points. “The removal of the German debt brake in tandem with continental re-armament, alluding to an end of Europe’s pro-austerity bias and a revival of regional growth prospects were, arguably, the catalyst for the process [bond sell-off],” said Philip McNicholas, Asia strategist of the global macro fixed income team at Robeco. German bunds are also pressured by wider deficits, which are likely to be structural, Mizuho Securities’ Varathan said. The 30-year Europe government bond yields have climbed over 12 basis points this week, and the 10-year yields are up about 7 basis points. “Investors don’t really have much love for long duration bonds right now,” Steve Sosnick, chief strategist at Interactive Brokers told CNBC. Concerns about global inflation are also a “killer” for longer bonds, said Sosnick, adding that shorter duration bonds are typically influenced by central bank policy, while longer duration debt is influenced more by investor expectations about the future of the economy. Bonds in some emerging market have bucked the wider trend though, with their yields dropping. India and China’s 10-year bond yields have slipped, largely as they are more domestically-oriented markets, and in part because of their capital controls, said McNicholas. India’s 10-year government bond yield inched lower by about 2 basis points since Monday, while China’s 10-year yield also slipped marginally. “Foreign investors and global factors are far less relevant determinants for their respective yield curves,” he said.

Stock futures inched higher early Thursday following a sizable sell-off on Wall Street as worries about a ballooning deficit deepened. S&P 500 futures and Nasdaq 100 futures added 0.14% and 0.18% respectively. Futures on the Dow Jones Industrial Average were flat. In regular trading, the blue-chip Dow slid more than 800 points, while the S&P 500 finished the day 1.6% lower. Equities were pressured by a sharp spike in Treasury yields amid concerns that a new U.S. budget bill would put even more stress on the country’s already large deficit. The rocky negotiations on Capitol Hill over tax and federal budget changes have become a fresh worry for investors after tariff headlines subsided. The massive budget bill in the House of Representatives hit a road block Tuesday when blue-state Republicans signaled they would not support the bill without a larger deduction for state and local taxes, often referred to as “SALT.” Opposition to the bill threatens to derail the tax legislation, which Trump and House Speaker Mike Johnson, R-La., hope to see passed before Memorial Day weekend. The bill could increase the U.S. government’s debt by trillions and raise the deficit at a time when fears of a flare-up in inflation due to Trump tariffs are already weighing on bond prices and boosting yields. The 30-year Treasury bond yield jumped again Wednesday to hit 5.09%, touching the highest level going back to October 2023. The benchmark 10-year Treasury note yield traded at 4.59%. “I think it really speaks to the impact from the rate of change of yields versus just that drift higher,” Kevin Gordon, Charles Schwab senior investment strategist, said on CNBC’s “Closing Bell.” “It’s driven by inflation concerns that are tied to the budget deficit that are then tied to the potential path of the dollar.” Investors will monitor weekly jobless claims data, set to be released Thursday morning, for clues about the labor market.

Replacing Nvidia is a tall order. While Chinese competitors are years behind the company’s cutting-edge technology, many analysts and insiders warn they are catching up, thanks to U.S. export restrictions. U.S. chip restrictions on the sale of advanced semiconductor technology, especially those used in artificial intelligence, have been rolled out over several years, with the initial aim of curbing China’s military advancement and protecting US dominance in the AI industry. However, according to Nvidia CEO Jensen Huang, U.S. semiconductor export controls on China have been “a failure,” causing more harm to American businesses than to China. While the goals of cutting back the Chinese military’s access to advanced U.S. technology and maintaining U.S. leadership in AI appear to have had some success on paper, loopholes and existing semiconductor stockpiles in China have complicated these aims, said Ray Wang, an independent tech and chip analyst with a focus on U.S.-China competition. “That’s partly why we are seeing a closing of the gap between Chinese and U.S. AI capabilities,” added Wang. A self-inflicted wound? Leaders of Nvidia and other American chip designers have long lobbied against chip controls as they worry about losing lucrative business deals. Huang said at the annual Computex technology trade show in Taipei that Nvidia’s GPU market share in China fell to 50% from 95% over the past four years. Indeed, chip experts say that the curbs create more harm than good for the U.S. “The effects of the controls are twofold. They have the impact of reducing the ability of U.S. companies to access the China market and, in turn, have accelerated the efforts of the domestic industry to pursue greater innovation,” said Paul Triolo, Partner and Senior VP for China at DGA Group. “You create competitors to your leading companies at the same time you’re cutting them off from a massive market in China,” he added. While Washington’s most comprehensive export controls were passed during former U.S. President Joe Biden’s term in the White House, curbs on Huawei and SMIC, China’s largest chipmaker, go back to Donald Trump’s first term in office. On April 15, Nvidia disclosed that new controls, which restricted sales of its H20 graphics processing units to China, had led to a $5.5 billion charge against its revenue. Counter-intuitive curbs The restrictions are expected to be a boon for the demand and development of local Nvidia alternatives like Huawei, which is working on its own AI chips. They also come against the background of Beijing mobilizing billions as part of its chip self-sufficiency campaign. “The bottom line is, the controls have incentivized China to become self-sufficient across these supply chains in a way they never would have contemplated before,” Triolo said. Chinese AI-related achievements, such as DeepSeek’s R1 model and news of Huawei chip progress, have led observers to question the effectiveness of chip controls. According Wang, the independent analyst, China’s semiconductor and AI space has seen an acceleration of startups, market opportunities, and AI talent alongside the restrictions, which has clearly resulted in domestic innovations. “I think the arguments that export controls accelerate innovation is quite valid,” Wang said. Nivida’s Haung also noted these trends in April, telling lawmakers in Washington that the country has made enormous progress in the last several years and is right behind the U.S. Moving goal posts? Nvidia’s H20 chip was designed specifically to comply with existing chip controls prior to the clampdown on exports. “We are not just talking about one export control, we are talking about a series of export controls that originate from all the way back in 2019,” said Wang, noting that the evolving policies have had a couple of different objectives. Meanwhile, in what DGA’s Paul Trilio calls a “moving of the goalposts,” it seems that the aims of the restrictions have shifted to an intention to slow down and contain Chinese AI and semiconductor developments. “The continued expansion of the controls, and the lack of an articulation of what the clear end game here is, has really created a lot of issues, and created a lot of collateral damage,” Trilio said, adding that it has led more people to question the policy. In a statement earlier this month, the Information Technology & Innovation Foundation, a U.S. think tank which has received funding from various technology companies, said in a post that “the Biden administration’s export control policy for AI chips has largely been a failure since day one. Yet, year after year, it has doubled down, attempting to plug various loopholes.” “While [the U.S. government] is certainly right to prevent U.S. companies from selling advanced AI technology to the Chinese military, cutting U.S. companies off from the entire commercial Chinese market is a cure worse than the disease,” Stephen Ezell of ITIF told CNBC in an email. “U.S. export controls have cost NVIDIA at least $15 billion in sales, and those are revenues the company needs to be able to earn to invest in future generations of innovation.”

Two staff members of Israel’s embassy in Washington, D.C., were shot dead outside the district’s Capital Jewish Museum on Wednesday night, officials said. The suspect shouted “Free, free Palestine” while in police custody and “implied” that he committed the shooting, Washington Police Chief Pamela Smith said. He was identified as Elias Rodriguez, in his early 30s, of Chicago. In custody, he told authorities where he discarded the weapon, Smith added. Mayor Muriel Bowser said there was no active threat to the community following the arrest. The victims were named by the embassy as Yaron Lischinsky and Sarah Milgram. Earlier, Yechiel Leiter, Israel’s ambassador to the United States, said they were a couple on a night out. Israeli Prime Minister Benjamin Netanyahu said he has directed security increases for Israeli missions and representatives around the world. He offered his condolences to the victims, saying, “My heart grieves for the families of the young beloveds, whose lives were cut short in a moment by an abhorrent antisemitic murderer.” The victims were leaving the museum, where an event was being held, when they were gunned down around 9 p.m., Leiter said. Ted Deutch, CEO of the American Jewish Committee, confirmed in a statement that the group was hosting the gathering. The man had been pacing back and forth outside the museum when he approached a group of four and opened fire using a handgun, Smith said. He then entered the building, where he was detained by security, she said. A spokesperson for the Israeli Embassy in Washington, Tal Naim Cohen, described the victims as two staff members, adding that they “were shot this evening at close range while attending a Jewish event.” Danny Danon, Israel’s ambassador to the United Nations, called the incident a “depraved act of anti-Semitic terrorism.” “Harming the Jewish community is crossing a red line,” he said on X. The shooting comes more than 18 months after Israel launched a bombing campaign and ground invasion in Gaza following the Oct. 7, 2023, terrorist attack on Israel by Hamas militants, in which more than 1,200 people were killed and hundreds more were taken hostage, according to Israeli tallies. Israel’s counteroffensive has killed more than 53,000 people in Gaza, many of them women and children, according to the Hamas-run Health Ministry in Gaza. International aid groups and governments have also warned of the risk of famine in the enclave. Netanyahu said Sunday that Israel would allow a limited amount of humanitarian aid to flow in following a three-month blockade. “Free Palestine” has become a popular refrain among supporters of the Palestinian cause. “The couple that was gunned down tonight in the name of ‘Free Palestine’ is a young couple about to be engaged,” he said at a late-night news conference. “The young man purchased a ring this week with the intention of proposing to his girlfriend next week in Jerusalem.” President Donald Trump condemned the violence. “These horrible D.C. killings, based obviously on antisemitism, must end, NOW! Hatred and Radicalism have no place in the USA. Condolences to the families of the victims. So sad that such things as this can happen!” he said on social media. “We’ll be doing everything in our power to keep all citizens safe, especially tonight our Jewish community,” Bondi said at the news conference. She added that Jeanine Pirro, the interim U.S. attorney for Washington, will prosecute the case. Other U.S. officials also decried the shooting. Homeland Security Secretary Kristi Noem said the victims were “senselessly killed,” and Senate Minority Leader Chuck Schumer, D-N.Y., who is Jewish, called it “another horrific instance of antisemitism which as we know is all too rampant in our society.” FBI Director Kash Patel said the agency was working with police to learn more and asked for prayers for the victims and their families. Steve Jensen, assistant director in charge of the FBI’s Washington field office, said his team was working to pin down whether the shooting may have been hate-motivated or potentially an act of terrorism.

Asia-Pacific markets fell Thursday, tracking declines on Wall Street as investor sentiment soured on fears that a new U.S. budget bill could substantially add to the country’s debt. Japan’s benchmark Nikkei 225 fell 0.84% to close at 36,985.87, while the Topix lost 0.58% to end the day at 2,717.09. South Korea’s Kospi slipped 1.22% to 2,593.67 and the small-cap Kosdaq declined 0.82% to close at 717.67. Australia’s benchmark S&P/ASX 200 fell 0.45% to end the trading day at 8,348.7. Hong Kong’s Hang Seng index slipped 1.19% to close at 23,544.31, while mainland China’s CSI 300 fell 0.06% to close at 3,913.87. Stock futures were flat in overnight trading Wednesday following a sizable sell-off on Wall Street as worries about a ballooning deficit deepened. Futures on the Dow Jones Industrial Average dipped 60 points. S&P 500 futures and Nasdaq 100 futures were both little changed. Overnight stateside, the three major averages closed lower. Stocks sold off, pressured by a sharp spike higher in Treasury yields as traders grew worried that a new U.S. budget bill would put even more stress on the country’s already large deficit. The Dow Jones Industrial Average lost 816.80 points, or 1.91% to 41,860.44. The S&P 500 shed 1.61% to 5,844.61. The Nasdaq Composite slid 1.41% to 18,872.64. The 30-year Treasury bond yield last traded around 5.09%, touching the highest level going back to October 2023. The benchmark 10-year Treasury note yield traded at 4.59%.

Stocks sold off on Wednesday, pressured by a sharp spike higher in Treasury yields as traders grew worried that a new U.S. budget bill would put even more stress on the country’s already large deficit. The Dow Jones Industrial Average lost 816.80 points, or 1.91% to 41,860.44. The S&P 500 shed 1.61% to 5,844.61. The Nasdaq Composite slid 1.41% to 18,872.64. The 30-year Treasury bond yield last traded around 5.09%, touching the highest level going back to October 2023. The benchmark 10-year Treasury note yield traded at 4.59%. Long-dated bonds sold off as traders worried a new budget bill would worsen the U.S. deficit. The measure is expected to pass as lawmakers reach a compromise on state and local tax deductions heading into Speaker Mike Johnson’s Memorial Day deadline. Yields spiked even higher after a poor afternoon auction for 20-year debt, raising fears investors may be losing their appetite for funding America’s deficits. “The question now is, from a fiscal perspective, what will the tax bill look like, and will it undo all of the recent fiscal frugality by simply raising the debt level at a slower rate of pace? So I think that’s why the 10-year yield is moving higher — because investors are worried that we’re really not doing anything to slow the pace of inflation and to reduce the debt,” Sam Stovall, CFRA Research chief investment strategist, told CNBC in an interview. “Now it seems as if there is a greater chance that the tax bill will pass, and that could end up simply continuing to raise the overall debt level,” he continued. Treasury yields had spiked last month as worries over President Donald Trump’s tariffs dented confidence in the safe haven status of U.S. debt. The 10-year in April swung from below 3.9% to more than 4.5% in just days. Yields eased from those levels after Trump announced delays on when the levies would take effect. Target shares dropped 5.2% after the big box retailer cut its full-year sales outlook, with executives citing tariff uncertainty and a backlash to the company’s pullback in diversity, equity and inclusion efforts. UnitedHealth was the worst-performing Dow member, losing 5.8% following a downgrade from HSBC. Major tech-related stocks Apple and Amazon also dropped as rates increased. Wednesday’s action comes after a tough session for the three major averages. The S&P 500 ended a six-day win streak, while the Nasdaq saw its first negative day in three. The major averages have staged sharp recoveries since a sell-off last month that engulfed markets after Trump unveiled steep tariffs on imported goods. The S&P 500 and Nasdaq are up more than 13% and 18%, respectively, in the past month. “Some [investors] are a little worried that we’ve gone too far, too fast, and are due for some digestion of recent gains,” Stovall added.

U.S. Treasury yields remained elevated on Thursday as the country’s growing fiscal deficit became a key concern for investors this week. At 3:40 a.m. ET, the 30-year Treasury yield held steady at 5.09%, a high not seen since November 2023. The 10-year yield declined just over one basis point to 4.58%, while the 2-year Treasury yield was lower by over 2 basis points to 3.99%. One basis point is equivalent to 0.01% and yields move inversely to prices. Investors have paid close attention to the U.S.′ budget deficit this week amid a series of blows, including Moody’s decision to downgrade the country’s credit rating by one notch, and U.S. President Donald Trump’s massive budget bill. Trump’s “big beautiful bill” has caused much negotiation and debate on Capitol Hill, and is estimated to add $3 trillion to $5 trillion to the country’s debt, which will increase the deficit, put pressure on inflation, and accelerate an already worrying bond market sell-off. This initial sell-off was triggered by Moody’s slashing the U.S.′ credit rating from Aaa — the highest level — to the second highest level Aa1 on Friday, citing “large annual fiscal deficits and growing interest costs.” That adds to worries that Treasurys may no longer be a risk-free and safe haven investment. “You put all that together, and the market is increasing that risk premium for long-term bonds,” said Kathy Jones, chief fixed income strategist at Charles Schwab. “There is a global repricing in a world where there’s just more sovereign debt and a lot more uncertainty about whether policies are going to adjust to make that look attractive.” Investors will be keeping an eye out for some economic data on Thursday, including weekly jobless claims — which will offer fresh insights into the labor market — and existing home sales.

Emerging markets stocks are in the spotlight again as the “sell U.S.” narrative gained fresh momentum, following Moody’s recent downgrade of the U.S. credit rating. The Bank of America heralded emerging markets as “the next bull market” recently. “Weaker U.S. dollar, U.S. bond yield top, China economic recovery…nothing will work better than emerging market stocks,” Bank of America’s team, led by investment strategist Michael Hartnett, said in a note. Similarly, JPMorgan upgraded emerging market equities from neutral to overweight on Monday, citing thawing U.S.-China trade tensions and attractive valuations. A dented confidence in U.S. assets, which kicked into high gear last month marked by a selloff in U.S. Treasurys, equities and greenback, has fueled the bullishness for emerging markets. The MSCI Emerging Markets Index, which tracks large and mid-cap representation across 24 EM countries, is up 8.55% year-to-date. This compares against a 1% climb by the U.S. benchmark S&P 500 across the same period. The difference was more stark in the weeks after April 2, when U.S. President Donald Trump unveiled “reciprocal” tariffs on friends and foes alike. While most benchmarks fell across the board in the immediate days after April 2, the week that followed showed a divergence between emerging market equities and U.S. stocks. Between April 9 to 21, the S&P 500 declined over 5%, while the MSCI Emerging Markets Index rose 7%. Even though U.S. equities and Treasurys rebounded slightly since, the recent Moody’s downgrade has reignited traders’ concerns. On Monday, the U.S. 30-year Treasury yield briefly grazed above 5% to hit levels not seen since November 2023, while U.S. equities also snapped a six-day winning streak on Tuesday. Start of a new rotation? The events that unfolded recently have reinforced the need for more diverse geographical exposure, said Malcolm Dorson, head of the active investment team at Global X ETFs. “After underperforming the S&P over the past decade, EM equities are uniquely positioned to outperform over the next cycle,” he added. “This possible perfect storm stems from a potentially weaker U.S. dollar, extremely low investor positioning, and outsized growth at discounted valuations,” he told CNBC. According to data provided by Dorson, in terms of positioning, many U.S. investors have just 3% to 5% in emerging markets, compared to the 10.5% in the MSCI Global Index, which captures the performance of large and mid-cap companies across 23 developed markets. Emerging markets are also trading at 12 times forward earnings “and at a bigger than typical discount” compared to developed markets, statistics from JPMorgan showed. Among emerging markets, Dorson believes India offers the best long-term growth play and spotlighted Argentina’s cheap valuation. Sovereign upgrades in countries like Greece and Brazil also helped to make them more attractive, he added. “We could be at the start of a new rotation,” said Mohit Mirpuri, equity fund manager at SGMC Capital. “After years of U.S. outperformance, global investors are beginning to look elsewhere for diversification and long-term returns, and emerging markets are firmly back in the conversation,” Mirpuri said. A weakening U.S. dollar — pressured by fiscal concerns and rising debt — has historically supported EM flows and FX stability, said a portfolio manager at VanEck, Ola El-Shawarby. But what could set the current optimism apart from previous emerging market rallies that fizzled out? “We’ve seen EM rallies before that ultimately lost steam, often because they were driven by short-term macro catalysts,” said El-Shawarby. This current cycle could be different because of the combination of deeply discounted valuations, historically low investor positioning, and more durable structural progress across key markets, she said, citing India’s long-term growth story anchored in domestic demand.

The Trump administration has formally accepted a Boeing 747 jet that was gifted to the U.S. by the government of Qatar, the Pentagon said Wednesday. Defense Secretary Pete Hegseth accepted the luxury plane “in accordance with all federal rules and regulations,” Pentagon spokesman Sean Parnell said in a statement to CNBC. The Department of Defense will work to ensure that the jet, which President Donald Trump has said he wants to use as the new Air Force One, fulfills “proper security measures and functional-mission requirements,” Parnell said. The announcement cements the U.S. government’s intention to take the plane, despite experts’ warnings and Democrats’ accusations of bribery. In the Oval Office on Wednesday, Trump called the gift “a great thing” and said Qatar handed over the plane “so they could help us out.” The remarks came during an at times tense debate with South African President Cyril Ramaphosa about Trump’s unsubstantiated claims of a “genocide” against white people in South Africa. “I am sorry I don’t have a plane to give you,” Ramaphosa said at one point. Boeing has spent years working to convert two 747s into the next Air Force Ones in a deal struck during Trump’s first term as president. But the project is years behind schedule, and the planes may not be ready before the end of Trump’s second term. Trump administration officials earlier this year said the president was frustrated with that pace and considering alternatives. “Boeing’s a little late, unfortunately,” Trump said Wednesday. Boeing CEO Kelly Ortberg told analysts on his company’s latest quarterly earnings call in April that its Air Force One program is being revised “to allow for an earlier first delivery while maintaining our focus on safety and quality.” It’s far from clear if the 13-year-old Qatari jet, which has been valued at $400 million, could truly offer a quick fix. Experts have said that converting that jet into an Air Force One could cost taxpayers over $1 billion and take years to complete. Qatar’s gift has also raised swells of anger from Democrats and other critics, some of whom have condemned the exchange as effectively a bribe of a U.S. president. “This unprecedented action is a stain on the office of the presidency and cannot go unanswered,” Senate Minority Leader Chuck Schumer, D-N.Y., said in a statement Wednesday. Schumer — who has introduced a bill that would bar any foreign aircraft from being used as Air Force One — vowed to continue holding up Trump’s political nominees to the Department of Justice until Americans “get transparency on this shady deal.” Even some Republicans have raised concerns about the potential national security risks and other issues surrounding the gift. “The transaction strikes me as being rife with political espionage, ethical and constitutional problems,” Sen. Susan Collins, R-Maine, said Thursday. But Trump has repeatedly defended accepting the plane, saying it would be “stupid” not to accept a free jet and insisting that it is going to the U.S. government, “not to me.”

Shares in Xpeng are set to extend their blistering rally of nearly 80% this year, according to analysts, as the Chinese electric-vehicle maker introduces newer models and moves toward profitability. Xpeng’s shares in Hong Kong surged over 10% Thursday following upbeat earnings and stronger-than-expected revenue forecast for the second quarter. Its shares soared as much as 10.2% to 85.5 Hong Kong dollars ($10.86), and were last trading 7% higher, taking year-to-date gains to 78%. The company is a key player in China’s hypercompetitive EV market, but has struggled to turn a profit amid rising competition and sluggish domestic demand. The Guangzhou-based carmaker’s first-quarter revenue more than doubled from a year earlier, driven by robust sales, according to its earnings released Wednesday. Xpeng said it delivered 94,008 vehicles in the first three months this year, more than four times the sales volume a year earlier. That improved top line helped narrow its net loss for the first quarter to 664 million yuan, compared to 1.37 billion yuan a year ago, and lifted its gross margin to 15.6% for the quarter from 12.9% a year earlier. Analysts expect Xpeng to turn profitable in the fourth quarter this year, thanks to its strong sales momentum and pipeline of new models. “We expect Xpeng to break even in 4Q25 and makes a turnaround from 1Q26,” analysts at UOB Kay Hian said in a note Thursday, expecting “a strong product cycle” to continue driving Xpeng’s sales. The brokerage maintains a buy rating on the stock and pegs target price at 150 Hong Kong dollars — over 76% upside from its current price. “When it comes to profitability, the company expects the gross margin to improve steadily in 2025, supported by higher premium model sales and further economies of scale,” UOB Kay Hian analysts said in the note. Xpeng has launched several new products, including the mass-market brand MONA last August and a renewed flagship model X9, featuring advanced autonomous driving system. The automaker said it aims to begin mass production of vehicles equipped with Level 3 autonomous driving features in China by year-end, a significant upgrade from the currently more common Level 2 systems. For the second quarter, Xpeng said it anticipates a revenue of 17.5 billion yuan to 18.7 billion yuan, compared with consensus forecast of 17.2 billion yuan, according to data compiled by LSEG. It expects to deliver up to 108,000 electric cars in the second quarter, more than double from a year earlier. The launch and delivery of MONA M03 Max model and new versions of its G7 and P7 cars will likely be the next “key catalyst” for Xpeng, Joel Ying, head of China autos at Nomura said in a note, pegging the target price for the U.S.-listed stock at $30. Xpeng’s U.S.-listed shares rose 13% to close at $22.25, powering a year-to-date rally of over 88%. Still, stock are well off its record of more than $72 apiece hit in November 2020, according to LSEG data. Rival BYD has seen shares in Hong Kong surge over 74% so far this year, Li Auto has risen more than 22%, while NIO has lost over 11%.