DeepSeek mania spawns shadow market

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0:32Good morning from the Financial Times. Today is Wednesday, September 9th, and this is your FT News Briefing. The UK is worried Anthropic is boxing them out, and Greece is rolling out the welcome mat to hedge funds. Plus, investors are in a feeding frenzy over Chinese AI company DeepSeek. I'm Sonia Hudson, Inframark Filipino, and here's the news you need to start your day.

1:08Anthropic declined to let Britain's AI Security Institute evaluate its latest model before releasing it. The UK organization is the global leader for testing artificial intelligence. Instead, the model was only made available to vetted US organizations. British government insiders tell the FT that's making them worry that American tech companies are following in the Trump administration's footsteps. U.S. President Donald Trump has in recent months become more protectionist with the industry. In June, he imposed sweeping export controls on Anthropik's most advanced models. Anthropik declined to comment, but last week the company said it was working with the U.S.

1:52government to, quote, expand access to a broader set of domestic and international partners as quickly as possible.

2:05Greece wants to be the next home for hedge funds from the UK and the Gulf. The Mediterranean country has a new tax regime it hopes will lure them to establish substantial operations in Athens. I'm joined now by the FT's Eleni Varvitsiadi. Hi, Eleni. Hi. So what is the pitch that Greece is making to hedge funds? So Athens has introduced during the summer new tax incentives for hedge fund managers. What Athens is saying is that if you come to Greece, then your tax on bonuses and carried interest from 15 % is going to go down to 5%. At the same time, government officials say that, you know, Greece has a budget surplus, has restructured its public debt.

2:53It has a very clear certainty and clarity over its fiscal trajectory, more than many other large European economists, and that there's no need, as Greece is running primary surpluses, to increase the taxes in the coming years. But what Athens is also saying is that for you to take advantage of this scheme, you need to spend 3 million euros per year in expenses here, which means that you actually need to have an office here. And why is Greece doing this now? I mean, let's not forget that Greece came out from a huge crisis more than a decade ago. It was struggling to keep capital inside its borders.

3:35Greek banks were subjected to capital controls in 2015. I mean, this is a great turnaround at this moment. Now Greece has regained its investment grade. And at the moment, the Greek government sees like it's a great opportunity for two main reasons. One, since the U.S. and Israeli attacks on Iran in February, there has been a growing interest from hedge fund managers who live in the Gulf who want to relocate. And second, there has been a wave of high profile wealth individuals who have left the UK in recent years as they are afraid of fiscal tightening and tough inheritance tax regimes and increased taxes.

4:19For example, recently, just this week, Greece secured a very high profile billionaire hedge fund manager, Chris Rokos, who decided to relocate from the UK to Greece. So besides Chris Rokos, how much interest has Greece gotten overall? The truth is, Sonia, that we don't know at this moment. What we know is that the Greek government has done a series of meetings with large and medium-sized hedge funds from around the world. But the truth is that there are several shortcomings that could constrain a flow of newcomers. And this is a shortage of high-end office space. It's a lack of housing that these executives would like to have and places and international schools.

5:06So there are issues that need to be solved. But I guess by having big names announcing that they are moving to Athens, the interest could be turned to Athens, which, of course, is not a financial center like London or other cities. Eleni Varvidsiadi covers Greece for the FT. Thanks, Eleni. Thank you very much.

5:32Oil prices jumped to almost$100 a barrel last night as of this recording. The price of Brent crude shot up after the U.S. launched new strikes on Iranian oil tankers. Houthi militants also hit Saudi Arabian energy infrastructure. The price of oil has been on the rise since late August. That's when the U.S. and Iran began exchanging fire after a period of relative calm. The U.S. said yesterday's strikes were in response to attempted missile attacks on a Navy warship. The Iran-backed Houthi militants have been hitting energy assets in the Middle East lately. That has deepened a supply crunch in the industry, which has led to a fresh wave of inflation around the world and contributed to a major bond market sell-off.

6:24investors are clamoring to get a piece of Chinese AI company DeepSeek a month ago it raised seven billion dollars to fund the expansion of its AI models and now investors want to hand over more cash but not everyone can get direct exposure to the company so a shadow market has popped up Joining me now to discuss is the FT's Asia financial correspondent, Arjun Neil-Allam. Hi, Arjun. Hi there. Okay, so Arjun, to start us off, what are you hearing from investors about DeepSeek's new fundraising round? Yeah, I mean, DeepSeek really is one of the hardest investment opportunities going around Hong Kong and Chinese investment circles.

7:06This is the company that shocked the world last year when it came out of seemingly nowhere to produce a model that was competitive with American AI models. So, you know, DeepSeek really represents a lot of the excitement around Chinese AI. And investors really are clamoring to get exposure to that here. How has DeepSeek responded to all this money flowing in? So DeepSeek is raising in its latest round at a valuation of around 71 billion US dollars. They have set some slightly unusual terms, including a five-year lockup period in which investors can't sell on their shares and no voting rights, which will allow those who already control the company to retain control.

7:45Now, we should also mention that DeepSeek did not respond to a request for comment. But Arjun, you report that despite these pretty restrictive terms, demand to get in on DeepSeek is still very intense. And it's even spawning a secondary market. Tell me more about that. So we've spoken to a lot of investors in Hong Kong who recently have been absolutely inundated with offers from investors that have allocations to this funding round to essentially share that allocation. And they do that by creating what are called special purpose vehicles or SPVs and people can buy into those. Now, the problem is that these investors can impose their own terms, essentially fees, both on the amount that you put in, but also on the profits you might make in the future from your stakes in DeepSeek.

8:36One investor told me that they received an offer to invest in DeepSeek, but the fees were 10 % of their total investment and 20 % of any additional profits they make. That's 10 and 20. Now, for reference, the average hedge fund fee structure would be 2 and 20. So this is a huge bump up in fees. So essentially, investors are actually paying a premium to get access to this equity in DeepSeek? Exactly. I guess the question I have, Arjun, is, you know, if there's this much interest in DeepSeek and demand for equity in the company, Why wouldn't DeepSeek just capitalize on that itself and raise a whole bunch more money?

9:19That's a good question. I mean, these Chinese AI labs, although they are competitive with the American ones, are not raising at valuations anywhere near Anthropical OpenAI or SpaceX, which are in the trillions now, or rumored to be in the trillions at least. DeepSeek is raising at a valuation of$71 billion, which is a lot for China, but, you pales in comparison to these USAI labs. They are just not investing as much. So my tech colleagues have reported that spending by DeepSeek on AI infrastructure this year is running at about 1.6 billion for the year, which is 10 times more than all of last year, but it's still very little compared to a lot of the US rivals.

10:00Okay, so DeepSeek is not spending as much money as American AI companies are. But, you know, more broadly, there have been a bunch of really incredible runs in Chinese tech companies. We've seen major IPOs from the robotics company Unitary, the chip maker CXMT this year. How do you see all this playing out? I think it's clear that Chinese financial regulators are encouraging and allowing national champions in technology, hardware and software to raise money onshore in China and in Hong Kong. And there is real investor interest. I mean, these companies, when they list a soaring four or five hundred percent on the first day.

10:43So I don't see this stopping right now. I think we will continue to see more and more big numbers like this. Arjun Neil-Allam is the FT's Asia Financial Correspondent. Thanks, Arjun. Thanks very much.

11:00Before we go, scientists at the Massachusetts Institute of Technology have found a way to create quote-unquote mini-livers. They would be for patients in need of liver transplants. The cell grafts would be delivered with a syringe, and they would produce the same proteins and enzymes that natural livers do. Now, the procedure has so far only been done successfully on mice. But if it works for humans, it would be the first time defunct organs could be replaced by smaller, specially engineered ones.

11:38You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

11:55Thank you.

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