DeepSeek Triggers US Selloff, PM Modi Speaks To Trump, RBI Measures For Liquidity | Rise With Profit
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In a world that is dominated by technology, disruption can send shockwaves that touch every shore. In the most recent example of this, the disruption came in the form of DeepSeek — a Chinese AI startup that was founded by quant fund Chief Liang Wenfeng.
The company's latest open-source large language model has flipped the global AI narrative. It offers performance that is comparable to what's been launched by the likes of OpenAI and Meta, but at a fraction of the cost. And if a startup was able to do this, it raises questions about the technological dominance of the US.
The model is designed to run on less-advanced chips, bypassing the US-imposed restrictions on cutting-edge semiconductor exports to China. Its app has surged to the top of Apple's App Store rankings.
The launch triggered a selloff in global tech stocks, with shares of major US AI-related companies, including Nvidia, Meta, and Microsoft, dropping in response to DeepSeek's success. In fact, Nvidia saw its market capitalsation drop by $593 billion — a record one-day loss for any company on Wall Street.
The tech-heavy Nasdaq Composite dropped over 3%, while the S&P 500 fell 1.5%. The Dow rose nearly 300 points. Bond yields fell and the dollar rose at the start of the week in the US, likely on the back of the flight to safety. In the Asia Pacific region, two of the three early risers were trading and they were heading in opposite directions. The Nikkei 225 was lower by over 1%, last I checked.
Incidentally, Chinese startup DeepSeek said yesterday it would temporarily limit registrations due to a cyberattack. The company resolved issues relating to its application programming interface and users' inability to log in to the website, according to its status page. The outages on Monday were the company's longest in around 90 days and coincides with its sky-rocketing popularity. That's based on a Reuters report.
Now, amid heightened global uncertainty after the inauguration of Donald Trump as President of the US, India's Prime Minister Narendra Modi took to social media to announce that he had spoken to the new President. He said he congratulated Trump on his historic second term. And that the two leaders were committed to a mutually beneficial and trusted partnership.
In the top news back home, the Reserve Bank of India has announced various special measures yesterday, such as the purchases of open market operations, longer tenure variable rate repo auctions and interventions in the foreign exchange market, in a bid to boost liquidity in the banking system. Cumulatively, these measures will likely infuse about Rs 1.5 lakh crore of liquidity into the banking system.
In view of the current tight liquidity conditions, the central bank decided to conduct open market operation purchase auctions of government bonds worth Rs 60,000 crore. These will be in three tranches of Rs 20,000 crore each and will be held on Jan. 30, Feb. 13 and Feb. 20, respectively.
The second measure is the 56-day variable rate repo auction for an amount of Rs 50,000 crore, which will be held on Feb. 7. Lastly, the third measure is the dollar-rupee buy-sell swap auction of $5 billion for six months on Jan. 31.
Ahead of the Monetary Policy Committee meeting next week, this is being seen as a precursor to an interest rate cut.
In other news, wealth and asset manager 360 One WAM Ltd. will be acquiring merchant banker and mutual fund distributor Batlivala & Karani Securities India Pvt. for Rs 1,884 crore. 360 One, which approved the acquisition of ET Money from Times Internet in June 2024, said the B&K acquisition would include a Rs 200-crore cash and cash equivalent component. The acquisition, structured as a combination of a stock swap and part-cash transaction, is subject to regulatory approvals, according to a statement on Monday.
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