AI at War: Chinese DeepSeek Competes Against American ChatGPT
Samira Ali
Staff Writer
On January 27, Wall Street was upended by an unprecedented event: Nvidia’s stock crashed by 17 percent, wiping out $589 billion in market value in a single day, the largest loss of a company in United States history. The catalyst behind the sudden crash was the announcement of DeepSeek, a Chinese startup that has developed a generative artificial intelligence (AI) model that is cheaper and more resource-efficient than its American counterpart, ChatGPT. This shockwave sent ripples throughout the financial market and sparked intense debates over the shifting dynamics of the Artificial Intelligence Race and the growing competition between the United States and China, writes The Associated Press.
Some semiconductor analysts argued that the reaction of Wall Street investors was overly dramatic. Stacy Rasgon stated in NBC Bay Area that “The models they built are fantastic, but they aren’t miracles either…these are things everybody is experimenting with.” While this is a valid point, it should not diminish the revolutionary nature of DeepSeek’s innovation. For years, U.S. tech giants and the U.S. government justified their massive investments in AI innovation on the premise of maintaining leadership in the field. Despite these efforts, DeepSeek, founded in 2023, emerged in the wake of the CHIPs Act, which imposed sanctions on semiconductor chip producers, halting the sale of their most advanced products to China. In bold defiance of these barriers, DeepSeek was able to utilize lower-performing chips, which are not banned in China, to produce an AI system called the R1. The R1 model is capable of advanced reasoning skills that are meant to simulate human reasoning. The model also displays its thought process to its user and utilizes these “thoughts” to further train itself, reports The Associated Press. As Silicon Valley venture capitalist Marc Anderssen describes in The Straits Times, DeepSeek is the modern “Sputnik moment” for the U.S., reminiscent of when the former Soviet Union launched the first man-made satellite into space in 1957,which triggered the Space Race.
DeepSeek’s ability to create a high-performance AI model, comparable to an American one without the use of the most advanced tech, has broader implications beyond AI. It points to the possibility that China could develop cost, energy, and resource-efficient solutions that may eventually surpass the U.S. DeepSeek reports that they were able to create the R1 model with a mere $6 million, compared to the whopping $100 million used to create OpenAI’s GPT-4, says BBC. U.S. companies now face an uncomfortable reality, forced to reevaluate their approach to innovation and investment. The industry’s reliance on increasingly expensive infrastructure and “compute or bust” strategies could become obsolete in the face of a new wave of demand for low-cost high-efficiency models.
The geopolitical impact of DeepSeek’s success is already rippling beyond AI itself. CNBC reports that on February 11, BYD, China’s largest electrical vehicle manufacturer, announced it would integrate DeepSeek into its fleet, using AI to enhance smart driving technologies, signaling a leap toward China’s technological self-sufficiency. BYDs founder, Wang Chaunfu, highlighted that smart driving will now become a standard safety feature in its cars, similar to seatbelts and airbags, further challenging the already struggling American car companies in China who are unable to comply with Chinese regulations. This move coincided with Meta’s announcement of a workforce restructuring plan, including a five percent layoff of its staff and an expansion of funding into AI engineers and development to catch up with domestic and Chinese competitors, writes Forbes. As China strengthens its hold on domestic talent, nearly half of the worlds AI experts are Chinese. BBC furthers that the government has made its goal, under China Innovation 2.0, to keep its talent within domestic companies to flourish its national AI capabilities and influence, which further threatens the future of American AI leadership. The result of these shifts may result in a more polarized and isolating tech and foreign policy landscape, as both nations compete for global AI dominance.
In this ever-evolving race, the competition between the U.S. and China for AI dominance is not just about technological superiority, but also about the leverage in foreign affairs that comes with it. DeepSeek’s innovation could mark a new beginning in this race, where cost effectiveness and resource efficiency are key to success. JDSUPRA states that as the Trump Administration plans to reinvent the nation’s approach to AI policy, it remains to be seen if the U.S. will be able to adjust to the new parameters in the race. However, the DeepSeek shockwave is undeniably a wakeup call for American industry and policymakers alike to rethink its strategy not just for leadership, but for national security.
Image courtesy of Getty Images.