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Retail investors flock to small-cap AI firms as Big Tech battles for share

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Retail investors flock to small-cap AI firms as Big Tech battles for share

Retail investors are piling into small-cap firms that employ artificial intelligence amid intensifying competition between tech titans Google parent Alphabet and Microsoft to secure leadership in the next big driver of growth.

The viral success of ChatGPT has turned the spotlight on AI on Wall Street, reminiscent of the blockchain hype from a few years ago when shares of companies remotely associated with the technology surged.

The $3-billion AI software firm C3.ai was the fifth most actively traded on Fidelity’s platform for small investors on Monday, while drawing record daily retail inflows worth $31.4 million, as per Vanda Research.

“Small-cap firms have AI as a much larger part of their business than the larger ones,” said Matthew Tuttle, chief executive officer of Tuttle Capital Management on the reason behind retail investors’ focus on the smaller firms.

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Tuttle said he had shorted C3.ai shares about a week ago, but was looking to switch to the long side because “that’s where the action is.”

SoundHound AI (SOUN.O), which offers voice AI platform services, and Thailand’s security firm Guardforce AI (GFAI.O) have more than doubled so far this year, while analytics firm BigBear. AI gained nine-fold in value.

“We are in a new and exciting AI arms race right now, and speculative investors are clearly trying to find the potential winners in the increasing growing caldron of AI adjacent companies,” said Arthur Hogan, chief market strategist at B.Riley Wealth.

Shares of Microsoft (MSFT.O), which backs ChatGPT parent OpenAI, gained 1.5% in premarket trading ahead of the AI launch later in the day.

Google owner Alphabet Inc (GOOGL.O) on Monday said it would launch a chatbot service Bard and more artificial intelligence for its search engine as well as developers.

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Microsoft is in a strong position in the AI race due to the combination of its close partnership with OpenAI and its Azure capabilities around computing and data, said Barclays analyst Raimo Lenschow.

U.S.-listed shares of Baidu Inc climbed nearly 15% on Tuesday after the Chinese search engine said it would complete internal testing of a ChatGPT-style project called “Ernie Bot” in March. Earlier in the day, a clutch of Chinese AI stocks had also rallied.

“There will clearly be winners and losers in the market current new thing AI, but it will also take some time to ascertain how all these artificial intelligence-focused companies plan on monetizing this exciting new technology.

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ByteDance confirms layoff plan at its Indonesian unit

ByteDance confirms layoff plan at its Indonesian unit

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ByteDance confirms layoff plan at its Indonesian unit

China’s ByteDance will lay off staff at its Indonesian unit following a deal where it bought a local e-commerce firm and combined it with its TikTok operation, a spokesperson said on Friday.

ByteDance, the owner of TikTok, did not say how many employees would be affected. Bloomberg had earlier reported there would be 450 jobs cut.

In January ByteDance completed a deal to buy a majority stake in Tokopedia, an Indonesian e-commerce firm, from the GoTo group.

ByteDance spokesperson Nuraini Razak told Reuters in a statement the company would “make necessary adjustments” as a result of the combination of TikTok and Tokopedia.

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“We identified areas to strengthen our organisation and better align our teams with company goals,” she said, adding the company would “aim to support employees throughout this transition”.

ByteDance had its own e-commerce operation in Indonesia via its TikTok app, but that was banned under an Indonesian rule that social media applications could not operate as an e-commerce platform.

Tokopedia is one of the leading e-commerce platforms in Southeast Asia’s largest economy.

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Indonesia minister threatens to shut down X over adult content

Indonesia minister threatens to shut down X over adult content

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Indonesia minister threatens to shut down X over adult content

Indonesia is prepared to shut down social media platform X if it does not comply with a regulation barring adult content, the country’s communications minister said on Friday. Indonesia, the world’s biggest Muslim-majority country, has strict rules that ban the sharing online of content deemed obscene.

Minister Budi Arie Setiadi told Reuters he had sent a warning letter to X related to this matter.

“We will certainly shut its services down,” he said, pointing to Indonesia’s electronic information and transaction (ITE) law that can carry a six-year jail sentence if someone spreads pornographic content.

His comments in an interview come after the social media platform recently updated its policies to permit consensually produced adult content.

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X, owned by billionaire Elon Musk, has not responded to Indonesia’s warning letter, Budi said, adding the government would send more letters before deciding on a potential closure.

X, formerly known as Twitter, did not immediately respond to a request by Reuters for comment.

Indonesians are big users of social media and X has 24.85 million users in the country, according to data gathering business Statista.

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Japan watchdog recommends action on MUFG units over sharing of client data

Japan watchdog recommends action on MUFG units over sharing of client data

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Japan's securities watchdog recommended on Friday that the banking and securities units of Mitsubishi UFJ Financial Group opens new tab (MUFG) be penalised for what it said was unauthorised sharing of client information. The Securities and Exchange Surveillance Commission (SESC) made the recommendation to the banking regulator, the Financial Services Agency (FSA), which hands out such punishments in Japan. The recommendation, which was widely expected, followed the SESC's investigation into MUFG's banking arm, MUFG Bank, and its two brokerage ventures with Morgan Stanley (MS.N), opens new tab. The investigation found that confidential client information had been shared between MUFG Bank and one of the two securities firms on at least 26 occasions between 2020 and 2023. MUFG Bank also illegally offered preferential lending rates to clients that did business with the group's two securities brokerages, the SESC said. Japan's "firewall" regulations prohibit banks and securities companies in the same group from sharing customer data with one another without the customer's consent. The investigation found no evidence of insider trading, but monitoring and internal controls were lacking, the SESC said. MUFG group companies will make every effort to strengthen control systems in light of the recommendation and will take measures to prevent recurrence, the parent company said in a statement. The two brokerages were established in 2010, two years after MUFG invested in Morgan Stanley at the height of the global financial crisis in 2008. MUFG owned around 23% of Morgan Stanley as of March 2024.

Japan’s securities watchdog recommended on Friday that the banking and securities units of Mitsubishi UFJ Financial Group  opens new tab (MUFG) be penalised for what it said was unauthorised sharing of client information.

The Securities and Exchange Surveillance Commission (SESC) made the recommendation to the banking regulator, the Financial Services Agency (FSA), which hands out such punishments in Japan.

The recommendation, which was widely expected, followed the SESC’s investigation into MUFG’s banking arm, MUFG Bank, and its two brokerage ventures with Morgan Stanley (MS.N), opens new tab.

The investigation found that confidential client information had been shared between MUFG Bank and one of the two securities firms on at least 26 occasions between 2020 and 2023.

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MUFG Bank also illegally offered preferential lending rates to clients that did business with the group’s two securities brokerages, the SESC said.

Japan’s “firewall” regulations prohibit banks and securities companies in the same group from sharing customer data with one another without the customer’s consent.

The investigation found no evidence of insider trading, but monitoring and internal controls were lacking, the SESC said.

MUFG group companies will make every effort to strengthen control systems in light of the recommendation and will take measures to prevent recurrence, the parent company said in a statement.

The two brokerages were established in 2010, two years after MUFG invested in Morgan Stanley at the height of the global financial crisis in 2008. MUFG owned around 23% of Morgan Stanley as of March 2024.

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