Strengthening of the Japanese Yen and Swiss Franc: The Impact of a Chinese Startup on Global Markets

On Monday, the Japanese yen and Swiss franc strengthened against major currencies amidst a massive sell-off in technology stocks. This movement came as markets assessed the impact of a new open-source artificial intelligence model launched by the Chinese startup DeepSeek.

DeepSeek introduced a free AI assistant that employs cheaper chips and a reduced amount of data. This technology challenges the dominance of current market players reliant on heavy tech investments.

1. Use of Cheaper Chips: DeepSeek's technology could reduce dependence on high-end chips, complicating expectations for growth in demand among leading manufacturers.

2. Reduced Data Costs: The AI assistant's need for less data decreases expenditure on centralized servers and cloud computing.

Safe-Haven Assets and Government Bonds

In light of the unveiling of this innovative AI assistant, investors shifted focus toward safer assets. Consequently, the yield on benchmark 10-year treasury bonds fell to a month-low of 4.561%.

- Safe-Haven Assets: The market's reaction to the new technology led to capital being moved into safe-haven assets like the Japanese yen and Swiss franc.

- Government Bonds: The decline in bond yields indicates a growing demand, a typical occurrence during times of market uncertainty.

Impact on the Stock Market

The $^SPX index fell by 1.6% to 6003.04, directly linked to a sharp decline in technology stock prices:

- Chip Manufacturer $NVDA : Shares of Nvidia, a leading AI chip manufacturer, plummeted nearly 14% to $123.02.

The current financial market scenario underscores the significant economic fluctuations that technological innovations can cause. The launch of DeepSeek's new AI assistant contributed to the strengthening of the Japanese yen and Swiss franc, reflecting a shift in investor preferences toward safer assets. Simultaneously, the decline in technology stocks like Nvidia highlights the importance of adaptability and resilience in a rapidly changing technological landscape.