WeekWatch

What happens when AI gets a body?

Unitree Robotics, a Chinese maker of humanoid robots, staged a successful listing in Shanghai last week, with its share price rising 460% on its first day of trading. The company recently unveiled “Superman”, able to jump two metres and run at over twelve metres per second. While profitable, traditional metrics reveal Unitree to be highly valued, trading on a historic price-earnings ratio of 900x and a price-to-sales ratio of 147x. Despite this, the company’s $50 billion-plus value reflects high expectations as investor attention in AI widens beyond software-based large language models (LLMs), semiconductors and cloud storage to physical applications. 

Some investors believe robots will be the next fast-growing frontier for AI. Investment bank JP Morgan estimates that global humanoid robot shipments will accelerate from 18,000 units in 2025 to 60,000 in 2026 and 1.75 million by 2030, despite imports being banned from the US as security threats. China accounts for half of global demand for humanoid robots. Supporters suggest humanoid robots could be used in logistics, manufacturing and inspections. More broadly, humanoid robots may prove vital in developed nations where birth rates are shrinking and populations are fast ageing. 

Onwards and upwards – US government debt reaches $40 trillion

According to the US Federal Reserve’s own figures, publicly held federal government debt has doubled since mid-2009. The record $40 trillion figure equates to daily interest payments of $3.8 billion. By comparison, the US spends about $2.3 billion every day on defence. 

Yet many economists argue that the more important issue is not the current level of debt itself, but the persistent budget deficits that continue to push that debt higher. The Congressional Budget Office (CBO) projects a federal deficit amounting to 5.8% of GDP in the 2026 fiscal year. An aging population, rising healthcare costs and growing interest payments are raising government spending, but tax revenues are expected to remain relatively stable as a share of economic output (GDP). 

If the deficit persists, the government will be forced to borrow more, increasing the amount of debt and associated servicing costs. Higher interest costs add to future deficits, worsening the longer-term fiscal outlook. 

The CBO forecasts that the federal deficit will rise to 6.7% by 2036. By comparison, deficits have averaged 3.8% of GDP over the past 50 years.¹

Will China’s AI strategy copy that for EVs?

OpenAI’s ChatGPT and Anthropic’s Claude are products synonymous with the US lead in AI. Yet the recent release of cheaper AI models by Chinese companies Deepseek and Moonshot indicate the performance gap with the best US models is closing based on their reasoning and coding capabilities. 

In the US, many of the most advanced AI models are proprietary and closed to external developers. In contrast, many leading Chinese models are open, which means the model software can be freely adapted, although some aspects, such as the methodology and training data used, remain protected.   

By undercutting US competitors on price, yet still offering high quality and fast improving models, some analysts see China’s approach as similar to that with EVs. Build good products (not necessarily the best), drive down costs, build out production, and prioritise market share over profitability. This approach has helped China rapidly gain market share in the European and UK new car markets. 

The US administration has barriers in place to defend its leadership in frontier AI. It has outlawed the sale of powerful AI chips to China and imposes 100% tariffs on imports of Chinese EVs. While considering restrictions on US companies using Chinese AI, a number of US companies using these cheaper models have argued that such a move will increase their costs, as well as being difficult to enforce. 

Mixed signals in the UK economy

UK headline inflation rose to 2.9% in the month to July, up from 2.6% the previous month. The jump had been expected by analysts and was driven by a 13% increase in the Ofgem energy price cap. This covers the period 1 July to 30 September for the 60% of customer accounts not on fixed tariffs. Elsewhere, core inflation (excluding energy, food and alcohol and tobacco) remained unchanged at 2.6%. 

According to Hetal Mehta, SJP’s Chief Economist, the UK economy is sending mixed signals. Although business surveys show activity remains resilient, stripping out the public sector, the labour market is weakening. This complicates the backdrop for prime minister Andy Burnham and chancellor John Healey as they gear up for the Budget in two months. Hetal notes that “the Bank of England is stuck in a pretty difficult place in terms of high inflation, which may force its hand into hiking interest rates”. 

US Treasury moves to lower longer-term yields, “Operation Twist”

Financial markets were caught off guard by US Treasury Secretary Scott Bessent’s move to issue short-term debt (3-12 months) and use the proceeds to buy back longer-term debt, targeting 10-30 year bonds. Why are they doing this? The move comes after the US 30-year Treasury yield reached 5.31%, a level last seen in 2007. Greg Venizelos, SJP’s Fixed Income Strategist comments: “Its purpose is to stop or at least reduce the move higher of yields at the long end. It has happened before both in 2012, when we were coming out of the global financial crisis, as well as in 1961.” 

By leaving liquidity in the system effectively unchanged and shifting duration (how much a bond’s price changes when interest rates move) Greg flagged that investors may eventually push back on increased levels of short-term bill issuance, which could create funding problems for the US.

Source

¹Congressional Budget Office. The Budget and Economic Outlook: 2026 to 2036. February 2026.

Tax receipts rise ahead of Autumn Budget

HM Revenue & Customs (HMRC) registered £322.7 billion in tax and national insurance contributions (NICs) receipts between April and July 2026.

This represents an uptick of £19.1 billion compared with the same period last year. Pay-as-you-earn receipts for April 2026 were the highest on record, contributing to this increase.

The rise in tax receipts is welcome news for the government, but contrasts with a larger than expected increase in government borrowing in July. Figures from the Office for National Statistics show there was a £1.8 billion gap between what the government spent and how much it collected in tax in the month. Experts had predicted a £500 million surplus. The figures could make it more likely the chancellor will announce new tax measures in the forthcoming October Autumn Budget.

FCA warns consumers against investing with unregulated companies

Consumers should beware of unapproved investments, the Financial Conduct Authority (FCA) has warned, after many consumers lost money through high-risk investments.

The regulator warned specifically against investing in loan notes and mini-bonds, instruments through which money is lent to companies in return for interest.

The marketing of these securities has been banned on the basis that they are complicated investments and not suitable for most people. But consumers may still come across them on social media, online adverts and some websites.

The FCA encourages consumers to do the following before investing:

• Check if the firm is authorised by the FCA here.
• Identify any potential warning signs of scams. The FCA offers guidance on it here.
• Don’t tick a box or sign anything saying you are a sophisticated or high net worth investor unless it is true. You could end up losing important protections by doing so.
• Check comparison sites to compare rates from other FCA-regulated providers.
• Ask how much of your money will actually be invested. Check the firm you are engaging with if anyone else will be paid commission or fees, and how much.