Global Navigator: Has DeepSeek deep-sixed tech sector momentum?

Reports that a Chinese company had built and trained an open-source artificial intelligence (AI) model in record time, and at a fraction of the costs incurred by US developers, roiled US equity markets during the final week of January. Investors found themselves revisiting assumptions about the major drivers of US markets such as Nvidia, Alphabet and Meta.

Fund flows during the final week of January suggest that many of those investors kept faith with their previous assumptions about AI. Flows into EPFR-tracked Technology Sector Funds hit a 16-week high, with a 3x leveraged bull fund leading the way.

Other trends captured by EPFR-tracked fund flows during the week ending Jan. 29 reveal:

• China Equity Funds took in over $1 billion (only their third inflow since mid-October).
• Largest outflow since the Covid-19 pandemic hit in 1Q20 from India Equity Funds.
• Flows into Frontier Markets Equity Funds climbed to a six-week high.
• Global Emerging Markets (GEM) Equity Funds posted their fifth straight outflow.
• Dividend Equity Funds recorded their 15th inflow in 16 weeks.
• Developed Markets Equity Funds experienced their fifth consecutive inflow.
• Over $20 billion steered into US Equity Funds.
• Japan Equity Funds ended the month with another outflow.
• UK Equity Funds also experienced solid redemptions.
• Flows into Sweden Equity Funds climbed to a 33-week high.
• Largest trading volume since mid-January 2022 for all EPFR-tracked Sector Funds.
• Technology Sector Funds continued their longest run of inflows since mid-3Q24.
• Physical Gold Funds extended their longest run of inflows since October.
• Strong inflows towards Bank Loan, High Yield and Emerging Markets Bond Funds.
• Redemptions from Money Market Funds totaled $12.5 billion.

For further insights, please read the full report.

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