AI remains resilient

It took less than a week from the launch of DeepSeek R1 - China’s AI app that caused US tech stocks to plummet – for lawmakers to start banning the chatbot from official state business.

The Australian government has prohibited employees from using DeepSeek on any devices and systems citing ‘security risks’.

Meanwhile US Republican Senator, Josh Hawley, has tabled a bill which aims to "prohibit United States persons from advancing artificial intelligence capabilities within the People’s Republic of China".

DeepSeek claims to have built an AI model for approximately USD5.6 million using Nvidia chips - a cost efficiency which, if true, represents a huge forward step in AI development. Comparable costs for the latest Chat GPT model were around USD100 million. Shortly after the announcement, Nvidia’s market value fell almost USD600 million.

For firms like Nvidia and their investors, efforts to stymie DeepSeek may come as a relief, but the reality is such competition in the tech sector is needed.

This week we bring you views from the industry that not only should new players like DeepSeek drive established tech players to up their game and put capital to better use, but investors need to look outside the so-called Magnificent Seven to protect their portfolios from future disruptors.

As Garry White, Chief Investment Commentator at wealth manager Charles Stanley, says: "The falls last week were probably healthy, as it was a valuation issue not an existential crisis. The falls reflected a sector that traded on elevated valuations being confronted by the force of disruption innovation".

Sticking with the importance of diversification, we bring news that private markets continue to attract assets from institutional investors who want to spread risk across their portfolios.

A study from Aviva Investors finds almost three-quarters (70 per cent) of global institutional investors cite diversification as the main reason for allocating to private markets today, although there is a growing recognition of the outperformance potential over public markets.

Seventy-three percent of respondents say they expect private markets investments to outstrip their public market counterparts over the next five years.

This will be music to the ears of the UK Chancellor Rachel Reeves who continues to see institutions as a key source of capital to support the nation’s growth ambitions.

Finally, we bring you a new podcast in which Rupert Pleasant, Chief Executive of Guernsey Financial, talks to Institutional Asset Manager Editor in Chief, Beverly Chandler, about what this burgeoning financial centre has to offer investors.

Gill Wadsworth, Editor, Institutional Asset Manager

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