Good morning. In today’s newsletter:
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China’s emboldened AI industry
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Trump presses Modi on trade relationship
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How Pakistan’s military is taking over its economy
Chinese artificial intelligence groups raced to push out their latest products before the lunar new year holiday, as Silicon Valley came to grips with the sector’s major advances led by start-up DeepSeek.
On Monday, the eve of China’s most important annual holiday, the Hangzhou-based company released a new open-source model for image generation, cementing its reputation as the disrupter-in-chief in a field previously dominated by US giants. It followed model releases from tech giant Alibaba and start-ups Moonshot and Zhipu.
“This is the equivalent of dropping a massive release on Christmas Eve. We’ve all been working overtime to get stuff out before the holiday,” said one product manager at a large language model start-up.
DeepSeek’s breakthrough has prompted panic in the US about the advances Chinese labs are making while on bootstrapped budgets and facing US chip restrictions. But in China, industry insiders say it is feeding into a newfound “confidence” that will spur investment. Read the full story.
Here’s more coverage of the AI upheaval:
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Nvidia rebounds: The US chipmaker led Wall Street technology stocks higher yesterday following the previous day’s sell-off.
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OpenAI responds: Chief executive Sam Altman said he would fast-track product releases and “deliver much better models” after DeepSeek’s advances undermined Silicon Valley’s lead in the global AI arms race.
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‘Irrational’ markets?: The hit to shares of asset managers and other companies caught up in Nvidia’s rout on Monday shows “the irrationality of markets”, says billionaire distressed debt investor Howard Marks.
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Why Nvidia investors are spooked: DeepSeek’s claim of a $5.6mn AI breakthrough wiped almost $600bn from Nvidia’s market value on Monday, yet many in Silicon Valley believe the broad sell-off is an overreaction.
And here’s what else we’re keeping tabs on today:
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Economic data: Australia reports December CPI inflation rate data.
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US interest rate decision: The Federal Reserve is not expected to cut interest rates today but the US central bank’s policy is already under scrutiny from President Donald Trump.
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Results: Tata Motors, Tesla, ASML, Meta and Microsoft report earnings.
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Lunar new year: Financial markets are closed across east and south-east Asia for the holiday.
Five more top stories
1. US President Donald Trump has pushed India’s Prime Minister Narendra Modi to buy more American-made weapons, as he called for the countries to rebalance their trade relationship in a call late on Monday. The two leaders cultivated a close relationship during Trump’s first term, but analysts pointed to several areas of friction between the countries under the new US administration.
2. Exclusive: SoftBank is in talks to lead a funding round for robotics start-up Skild AI that would more than double its valuation to close to $4bn, as Masayoshi Son hunts for deals to match his vaunted ambitions for the sector. US-based Skild wants to build the world’s first AI “brain” for robots.
3. HSBC will shut down key parts of its investment banking business in the UK, Europe and the Americas, as part of chief executive Georges Elhedery’s plan to overhaul its operations. The bank said it would keep “more focused” M&A and equity capital markets capabilities in Asia and the Middle East. Here’s what else we know.
4. International hotel groups are expanding in China and converting unoccupied office blocks to hotels as they look to target younger, more cost-conscious travellers. Hyatt, IHG and Radisson are all opening new hotels in China as demand for expensive hotel rooms in the country falls.
5. A test aircraft built by a US start-up has broken the sound barrier for the first time during a flight, potentially paving the way for the return of supersonic commercial travel more than 20 years since Concorde’s final flight.
India’s Budget this Saturday will decide the economic future of the world’s most populous country in a crucial year. Have questions? Email us at [email protected] or hit “reply” and remember to include your name and where you’re writing from. We’ll answer them in a special weekend edition of the newsletter.
The Big Read
Pakistan’s army has always had an outsized role in the nation’s politics, but in recent years, the tentacles of the military have extended deep into the country’s economy. The armed forces have become intimately involved in everything from canal projects to energy contracts. Investors are increasingly nervous.
We’re also reading . . .
Graphic of the day
China has built up control of critical minerals across the developing world over the course of two decades through a network of at least 26 state-backed financial institutions, according to new research. Here’s what the report revealed about Beijing’s lending abroad.
Take a break from the news . . .
Hong Kong’s traditionally male-dominated restaurant scene has undergone a generational shift, and today many of its most exciting and talented chefs are women. Meet three of the best.
Read the full article here