Trump's $500B AI Investment Plan Faces Challenge from China's DeepSeek

'As Easy As It Can Be': Trump Promises AI Giants Support With $500B Investment Plan, How Does It Compare With DeepSeek? - NVIDIA (NASDAQ:NVDA), Oracle (NYSE:ORCL)

President Donald Trump unveiled a $500 billion private-sector AI investment package on his second day in office last week, just as Chinese startup DeepSeek demonstrated it can match U.S. technology at a fraction of the cost. The "Stargate" project, backed by OpenAI's Sam Altman, SoftBank's Masayoshi Son, and Oracle's ORCL Larry Ellison, aims to build massive data centers in Texas over four years. "This is money that normally would have gone to China," Trump said during the announcement. DeepSeek's breakthrough threatens to upend the AI landscape. The nascent Chinese company's latest models match leading U.S. chatbots while using fewer resources, challenging the assumption that AI advances require ever-increasing computing power and investment. Don't Miss: Built on the trusted network of Fortune 500 companies, this blockchain company partners with Salesforce to uproot lengthy and expensive B2B transactions, and you can invest with just $100. This 12,000 RPM Spinning Battery With Over $100 Million In LOIs Could Be The Missing Link For Green Energy -- Here's Why Early Investors Are Flocking To Invest Before Funding Closes The timing heightens tensions in the U.S.-China tech rivalry. Trump's administration includes China hawks like AI czar David Sacks and Under Secretary of State nominee Jacob Helberg, who each view the AI race as crucial to national security. Silicon Valley executives hope Trump will loosen domestic regulations while maintaining pressure on China. The president already scrapped Biden-era requirements for AI companies to share information with the government, promising Stargate partners to make development "as easy as it can be." DeepSeek's rise suggests U.S. export controls on advanced semiconductors haven't prevented Chinese innovation, according to a report by The Economist. The company's mobile app topped U.S. iPhone downloads in January, with investor Marc Andreessen calling it "AI's Sputnik moment." Trending: Nancy Pelosi Invested $5 Million In An AI Company Last Year -- Here's How You Can Invest In Multiple Pre-IPO AI Startups With Just $1,000 "More investment does not necessarily lead to more innovation. Otherwise, large companies would take over all innovation," DeepSeek founder Liang Wenfeng told Chinese media, noting U.S. chip restrictions remain his main challenge. The contrast between Trump's massive investment push and DeepSeek's efficient approach highlights diverging strategies in the AI race. While U.S. firms bet on overwhelming resources, Chinese companies focus on maximizing limited computing power. The battle extends beyond raw investment numbers. The Biden administration's "Framework for Artificial Intelligence Diffusion," now under Trump's review, aims to tighten controls on GPU exports and AI data sharing. Critics, including semiconductor giant Nvidia NVDA, argue such restrictions could backfire, pushing allies toward Chinese technology. Meanwhile, DeepSeek's models remain constrained by Chinese censorship, automatically deflecting queries about sensitive topics like the Tiananmen Square protests or President Xi Jinping. The company also faces infrastructure challenges, experiencing outages as user numbers surge. Read Next: Inspired by Uber and Airbnb - Deloitte's fastest-growing software company is transforming 7 billion smartphones into income-generating assets - with $1,000 you can invest at just $0.26/share! According to Juniper Research, the total value of B2B cross-border payments stored on the blockchain is projected to exceed $4.4 trillion -- Join the first company to bring blockchain payments to Salesforce early with just $100. NVDANVIDIA Corp$119.23-4.35%Overview Rating:Good75%Technicals Analysis1000100Financials Analysis600100WatchlistOverviewORCLOracle Corp$168.05-1.37%Market News and Data brought to you by Benzinga APIs

Trump White House Puts DeepSeek Under National Security Scanner: 'Wake-Up Call To The American AI Industry' - Alibaba Gr Hldgs (NYSE:BABA), Advanced Micro Devices (NASDAQ:AMD)

On Tuesday, the White House said the National Security Council is reviewing the implications of DeepSeek, a Chinese AI firm. What Happened: The White House press secretary Karoline Leavitt confirmed the development stating, "This is a wake-up call to the American AI industry," reported Reuters. She echoed President Donald Trump's earlier remarks, saying that the White House remained committed to securing America's leadership in AI innovation. The review comes amid fears of intellectual property theft, a concern raised by David Sacks, the White House's AI and crypto czar. See Also: DeepSeek Flags Fake Founder's Account On X As Open-Source AI Model Surpasses OpenAI's ChatGPT On Apple Store In a Fox News interview on Monday, Sacks highlighted the AI technique known as distillation, where one model learns from another, as a potential threat. "I think one of the things you're going to see over the next few months is our leading AI companies taking steps to try and prevent distillation ... That would definitely slow down some of these copycat models," he said. Subscribe to the Benzinga Tech Trends newsletter to get all the latest tech developments delivered to your inbox. Why It Matters: Earlier, veteran investor Ross Gerber also criticized DeepSeek's privacy policy, stating that user data might be stored on servers in China. Meanwhile, Alibaba Group Holding BABA has also introduced a new AI model, Qwen2.5-VL, to rival OpenAI's offerings. In response to the competitive threat posed by DeepSeek, OpenAI has also launched a specialized version of ChatGPT for U.S. government agencies. On Monday, technology stocks globally experienced a sell-off due to concerns that DeepSeek's cost-effective model could challenge U.S. AI leaders. Nvidia Corporation NVDA, the leading U.S. maker of high-performance AI chips, saw its shares tumble 17%, erasing approximately $600 billion from its market capitalization -- a record one-day loss. The Nasdaq 100 slumped over 3% on Monday witnessing its sharpest decline since Dec. 18. While in office, former President Joe Biden implemented extensive export controls on AI chips and manufacturing equipment from companies like Nvidia and Advanced Micro Devices Inc. AMD. This was aimed to curb China's advancements in AI. Image Courtesy: Shutterstock.com Check out more of Benzinga's Consumer Tech coverage by following this link. Read Next: Satya Nadella Said 'We Should Take Development Out Of China Very, Very Seriously.' Now, DeepSeek's R1 Has Emerged As A ChatGPT Killer, Outperforming OpenAI With 50x Lower Costs: Here's More Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors AMDAdvanced Micro Devices Inc$114.33-0.59%Overview Rating:Speculative37.5%Technicals Analysis660100Financials Analysis200100WatchlistOverviewBABAAlibaba Group Holding Ltd$96.206.90%NVDANVIDIA Corp$127.647.79%Market News and Data brought to you by Benzinga APIs

Trump calls DeepSeek a 'wake-up call' for U.S. tech companies

Chinese AI startup DeepSeek has captured the tech world's attention in a way we haven't seen since ChatGPT and now, Donald Trump's got something to say about it, too. "The release of DeepSeek, AI from a Chinese company should be a wake-up call for our industries that we need to be laser-focused on competing to win," said the president, addressing House Republicans in Miami on Monday. The comments come after a red day in the U.S. stock market, in which Nvidia shed more than $500 billion in market cap on fears that DeepSeek's optimized approach to AI will reduced demand for Nvidia hardware. DeepSeek R1 is the latest LLM from Chinese AI company DeepSeek. It wins over competitors, including OpenAI's most powerful models, in benchmarks, while requiring less computing power for training. It's cheaper to use than OpenAI's models, and it's open-source, making it easy for any tech company to use, repurpose, and modify as they see feet. Read our detailed overview of DeepSeek R1 on Mashable. While there are still a lot of unknowns about DeepSeek R1 and the company that built it, numerous U.S. tech leaders praised its efficiency and the fact that it's open-source. Speaking at the World Economic Forum in Davos, Switzerland, Microsoft's Satya Nadella called DeepSeek R1 "super impressive," while investor Marc Andreessen called DeepSeek "one of the most amazing and impressive breakthroughs" he'd ever seen. The impact that DeepSeek had on the U.S. stock market immediately raised question on how the Trump administration will handle the news, including the possibility of outright banning it in the U.S. So far, however, it appears that Trump is seeing it as healthy competition rather than a threat to U.S. companies.

Trump warns of 'wake-up call' as low-cost Chinese AI jolts Silicon Valley - VnExpress International

Last week's release of the latest DeepSeek model initially received limited attention, overshadowed by the inauguration of Trump on the same day. However, over the weekend, the Chinese artificial intelligence startup's chatbot surged to become the most downloaded free app on Apple's U.S. App Store, displacing OpenAI's ChatGPT. What truly rattled the industry was DeepSeek's claim that it developed its latest model, the R1, at a fraction of the cost that major companies are investing in AI development, primarily on expensive Nvidia chips and software. The development is significant given the AI boom, ignited by ChatGPT's release in late 2022, has propelled Nvidia to become one of the world's most valuable companies. The news sent shockwaves through the U.S. tech sector, exposing a critical concern: should tech giants continue to pour hundreds of billions of dollars into AI investment when a Chinese company can apparently produce a comparable model so economically? DeepSeek's apparent advances were a poke in the eye to Washington and its priority of thwarting China by maintaining American technological dominance. Trump reacted quickly on Monday, saying the DeepSeek release "should be a wake-up call for our industries that we need to be laser-focused on competing to win." He argued that it could be a "positive" for U.S. tech giants, adding: "instead of spending billions and billions, you'll spend less, and you'll come up with hopefully the same solution." The development also comes against a background of a U.S. government push to ban Chinese-owned TikTok in the United States or force its sale. David Sacks, Trump's AI advisor and prominent tech investor, said DeepSeek's success justified the White House's decision to reverse executive orders, issued under Joe Biden, that established safety standards for AI development. The regulations "would have hamstrung American AI companies without any guarantee that China would follow suit," Sacks wrote on X. Adam Kovacevich, CEO of the tech industry trade group Chamber of Progress, echoed the sentiment: "Now the top AI concern has to be ensuring (the United States) wins." Tech investor and Trump ally Marc Andreessen declared "Deepseek R1 is AI's Sputnik moment," referencing the 1957 launch of Earth's first artificial satellite by the Soviet Union that stunned the Western world. "If China is catching up quickly to the U.S. in the AI race, then the economics of AI will be turned on its head," warned Kathleen Brooks, research director at XTB, in a note to clients. Microsoft CEO Satya Nadella took to social media hours before markets opened to argue less expensive AI was good for everyone. But last week at the World Economic Forum in Davos, Nadella warned: "We should take the developments out of China very, very seriously." Microsoft, an eager adopter of generative AI, plans to invest $80 billion in AI this year, while Meta announced at least $60 billion in investments on Friday. 'Outplayed' Much of that investment goes into the coffers of Nvidia, whose shares plunged a staggering 17% on Monday. The situation is particularly remarkable since DeepSeek, as a Chinese company, lacks easy access to Nvidia's state-of-the-art chips after the US government placed export restrictions on them. The esteemed Stratechery tech newsletter and others suggested that DeepSeek's innovations stemmed from necessity, as lacking access to powerful Nvidia-designed chips forced them to develop novel methods. The export controls are "driving startups like DeepSeek to innovate in ways that prioritize efficiency, resource-pooling, and collaboration," wrote the MIT Technology Review. Elon Musk, who has invested heavily in Nvidia chips for his company xAI, suspects DeepSeek of secretly accessing banned H100 chips -- an accusation also made by the CEO of ScaleAI, a prominent Silicon Valley startup backed by Amazon and Meta. But such accusations "sound like a rich kids team got outplayed by a poor kids team," wrote Hong Kong-based investor Jen Zhu Scott on X. In a statement, Nvidia said DeepSeek's technology was "fully export control compliant."

Trump says China's DeepSeek AI 'should be a wake-up call' for American tech companies

The DeepSeek app on a smartphone in Hong Kong on Monday.Lam Yik / Bloomberg via Getty Images President Donald Trump said Monday that the sudden rise of Chinese AI app DeepSeek "should be a wake-up call" for America's tech companies, as the runaway popularity of yet another Chinese app presented new questions for the administration and congressional leaders. Trump said that he still expected U.S. tech companies to dominate artificial intelligence, but he acknowledged the challenge posed by DeepSeek, a low-cost AI assistant that rose to No. 1 on the Apple app store over the weekend. "The release of DeepSeek AI from a Chinese company should be a wake-up call for our industries that we need to be laser focused on competing," he said while traveling in Florida. DeepSeek is causing a panic within U.S. tech companies and in the stock market because it has performed well in tests compared to competing AI models from Meta and OpenAI, while it was developed at a much lower cost, according to the little-known Chinese startup behind DeepSeek. Trump said he considered the low-cost model to be "very much a positive development" for AI overall because "instead of spending billions and billions, you'll spend less, and you'll come up with, hopefully, the same solution." DeepSeek is the latest in a series of Chinese apps to surge in popularity in the U.S. in recent weeks. Americans embraced Chinese apps RedNote and Lemon8 as alternatives to TikTok, when TikTok was on the verge of being banned temporarily in the U.S. for its own links to China. TikTok went dark for less then a day and came back online for existing users after Trump delayed enforcement of a bipartisan law requiring either a new non-Chinese owner or a ban. TikTok, though, remains unavailable for new downloads from the Apple and Google app stores. Security experts have expressed concern about TikTok and other apps with links to China, including from a privacy standpoint. Last week, Trump signed an executive order undoing certain Biden administration rules about AI development that Trump said had held the industry back. It wasn't immediately clear, though, what new AI policies, if any, the Trump administration or Congress might pursue in response to DeepSeek's rise. Rep. John Moolenaar, R-Mich., the chair of the House Select Committee on China, said Monday he wanted to see the U.S. act to slow down DeepSeek, going further than Trump did in his remarks. "DeepSeek -- a new AI model controlled by the Chinese Communist Party -- openly erases the CCP's history of atrocities and oppression," he said, referring to reports that DeepSeek censors topics such as Tiananmen Square. "The U.S. cannot allow CCP models such as DeepSeek to risk our national security and leverage our technology to advance their AI ambitions. We must work to swiftly place stronger export controls on technologies critical to DeepSeek's AI infrastructure," he said. DeepSeek's developers say they created the app despite existing U.S. controls on the export of high-performing semiconductors, leading to a vigorous online debate Monday about how effective those controls have been and what their future should be. Sen. Mark Warner, D-Va., defended existing export controls related to advanced chip technology and said that more regulation might be needed. "While I think there's more to learn about DeepSeek's development activities, what's in the public record reveals that the PRC continues [to] prioritize advancement in AI and that export control alone will not stymie their efforts," he said. "Claims that export controls have proved ineffectual, however, are misplaced: DeepSeek's efforts still depended on advanced chips, and PRC hyperscalers' efforts to build out worldwide cloud infrastructure for deployment of these models is still heavily impacted by U.S. controls," he said. House Speaker Mike Johnson, R-La., called DeepSeek "a serious threat" and said China had been a "terrible trading partner." "They abuse the system. They steal our intellectual property. They're now trying to get a leg up on us on AI, as you've seen the last day or so," he said. "It's a serious threat to us and to our economy and our security in every way. So the president takes that seriously, and I think that he will deal with that [in an] appropriate manner." David Sacks, Trump's White House AI and cryptocurrency czar, said in a post on X that DeepSeek's success "shows that the AI race will be very competitive." He also said that former President Joe Biden had "hamstrung" American AI companies with a previous executive order on the subject. "I'm confident in the U.S. but we can't be complacent," he wrote.

Trump says China's DeepSeek AI 'should be a wake-up call' for American tech companies

U.S. President Donald Trump speaks during a House Republican members conference meeting in Trump National Doral resort, in Miami, Florida, U.S. Jan. 27, 2025. President Donald Trump said Monday that the sudden rise of Chinese AI app DeepSeek "should be a wake-up call" for America's tech companies, as the runaway popularity of yet another Chinese app presented new questions for the administration and congressional leaders. Trump said that he still expected U.S. tech companies to dominate artificial intelligence, but he acknowledged the challenge posed by DeepSeek, a low-cost AI assistant that rose to No. 1 on the Apple app store over the weekend. "The release of DeepSeek AI from a Chinese company should be a wake-up call for our industries that we need to be laser focused on competing," he said while traveling in Florida. DeepSeek is causing a panic within U.S. tech companies and in the stock market because it has performed well in tests compared to competing AI models from Meta and OpenAI, while it was developed at a much lower cost, according to the little-known Chinese startup behind DeepSeek. Trump said he considered the low-cost model to be "very much a positive development" for AI overall because "instead of spending billions and billions, you'll spend less, and you'll come up with, hopefully, the same solution." DeepSeek is the latest in a series of Chinese apps to surge in popularity in the U.S. in recent weeks. Americans embraced Chinese apps RedNote and Lemon8 as alternatives to TikTok, when TikTok was on the verge of being banned temporarily in the U.S. for its own links to China. TikTok went dark for less then a day and came back online for existing users after Trump delayed enforcement of a bipartisan law requiring either a new non-Chinese owner or a ban. TikTok, though, remains unavailable for new downloads from the Apple and Google app stores. Security experts have expressed concern about TikTok and other apps with links to China, including from a privacy standpoint. Last week, Trump signed an executive order undoing certain Biden administration rules about AI development that Trump said had held the industry back. It wasn't immediately clear, though, what new AI policies, if any, the Trump administration or Congress might pursue in response to DeepSeek's rise. Rep. John Moolenaar, R-Mich., the chair of the House Select Committee on China, said Monday he wanted to see the U.S. act to slow down DeepSeek, going further than Trump did in his remarks. "DeepSeek -- a new AI model controlled by the Chinese Communist Party -- openly erases the CCP's history of atrocities and oppression," he said, referring to reports that DeepSeek censors topics such as Tiananmen Square. "The U.S. cannot allow CCP models such as DeepSeek to risk our national security and leverage our technology to advance their AI ambitions. We must work to swiftly place stronger export controls on technologies critical to DeepSeek's AI infrastructure," he said. DeepSeek's developers say they created the app despite existing U.S. controls on the export of high-performing semiconductors, leading to a vigorous online debate Monday about how effective those controls have been and what their future should be. Sen. Mark Warner, D-Va., defended existing export controls related to advanced chip technology and said that more regulation might be needed. "While I think there's more to learn about DeepSeek's development activities, what's in the public record reveals that the PRC continues [to] prioritize advancement in AI and that export control alone will not stymie their efforts," he said. "Claims that export controls have proved ineffectual, however, are misplaced: DeepSeek's efforts still depended on advanced chips, and PRC hyperscalers' efforts to build out worldwide cloud infrastructure for deployment of these models is still heavily impacted by U.S. controls," he said. House Speaker Mike Johnson, R-La., called DeepSeek "a serious threat" and said China had been a "terrible trading partner." "They abuse the system. They steal our intellectual property. They're now trying to get a leg up on us on AI, as you've seen the last day or so," he said. "It's a serious threat to us and to our economy and our security in every way. So the president takes that seriously, and I think that he will deal with that [in an] appropriate manner." David Sacks, Trump's White House AI and cryptocurrency czar, said in a post on X that DeepSeek's success "shows that the AI race will be very competitive." He also said that former President Joe Biden had "hamstrung" American AI companies with a previous executive order on the subject. "I'm confident in the U.S. but we can't be complacent," he wrote.

Trump Responds After DeepSeek Humiliates His Splashy AI Announcement

President Donald Trump has responded to the rapid rise of the Chinese startup DeepSeek, whose recently released AI model has him and his Silicon Valley pals looking like a bunch of chumps. "The release of DeepSeek AI from a Chinese company should be a wake-up call for our industries that we need to be laser-focused on competing to win," Trump said Monday at a GOP event in Florida. It's a relatively measured take from Trump, considering his usual -- though occasionally wavering -- hawkishness on China, complete with a metaphorical stern glance to the domestic tech sector. The Republican president also added that he viewed the model's low-cost as a "positive development." "Instead of spending billions and billions, you'll spend less and you'll come up with hopefully the same solution," Trump said. Released last week, DeepSeek's open-source R1 model rivals the West's best at a fraction of the cost. It was developed using older Nvidia AI chips, for purportedly under $6 million. Despite these limitations, R1 matches up to leading chatbots like OpenAI's o1 model, and in certain benchmarks, even surpasses them. For Trump and his tech allies -- themselves often recent convertees to his political enclave -- the timing couldn't have been worse. The new administration had just announced its Stargate deal, which would raise $500 billion of private capital towards building AI infrastructure in the US. Its backers included OpenAI, Oracle, Softbank, and Emirati state-run investment firm MGX. That staggering sum is emblematic of the outrageous amounts of capital and processing power that the industry talking heads have been insisting is necessary to develop large AI models. Thus far, the preferred way of making AI more powerful has been through scaling, or leveraging more data and adding more AI chips. In other words, making the AI models bigger -- which isn't very efficient, money or energy-wise. With DeepSeek riposting without anywhere near the same amount of resources, Stargate's half-trillion dollar price tag now looks like a ridiculous monument to the tech industry's arrogance. And generally, the stock market agrees. The buzz stirred by the Chinese AI model wiped out over $1 trillion from leading US tech stocks, or about two Stargates worth. Roughly $600 billion of those losses came from Nvidia.

American AI firms try to poke holes in disruptive DeepSeek

SAN FRANCISCO - Developers at leading U.S. AI firms are praising the DeepSeek AI models that have leapt into prominence while also trying to poke holes in the notion that their multi-billion dollar technology has been bested by a Chinese newcomer's low-cost alternative. Chinese startup DeepSeek on Monday sparked a stock selloff and its free AI assistant overtook OpenAI's ChatGPT atop Apple's App Store in the U.S., harnessing a model it said it trained on Nvidia's lower-capability H800 processor chips using under $6 million. As worries about competition reverberated across the U.S. stock market, some AI experts applauded DeepSeek's strong team and up-to-date research but remained unfazed by the development, said people familiar with the thinking at four of the leading AI labs, who declined to be identified as they were not authorized to speak on the record. OpenAI CEO Sam Altman wrote on X that R1, one of several models DeepSeek released in recent weeks, "is an impressive model, particularly around what they're able to deliver for the price." Nvidia said in a statement DeepSeek's achievement proved the need for more of its chips. Software maker Snowflake decided Monday to add DeepSeek models to its AI model marketplace after receiving a flurry of customer inquiries. With employees also calling DeepSeek's models "amazing," the U.S. software seller weighed the potential risks of hosting AI technology developed in China before ultimately deciding to offer it to clients, said Christian Kleinerman, Snowflake's executive vice president of product. "We decided that as long as we are clear to customers, we see no issues supporting it," he said. Meanwhile, U.S. AI developers are hurrying to analyze DeepSeek's V3 model. DeepSeek in December published a research paper accompanying the model, the basis of its popular app, but many questions such as total development costs are not answered in the document. China has now leapfrogged from 18 months to six months behind state-of-the-art AI models developed in the U.S., one person said. Yet with DeepSeek's free release strategy drumming up such excitement, the firm may soon find itself without enough chips to meet demand, this person predicted. DeepSeek's strides did not flow solely from a $6 million shoestring budget, a tiny sum compared to $250 billion analysts estimate big U.S. cloud companies will spend this year on AI infrastructure. The research paper noted that this cost referred specifically to chip usage on its final training run, not the entire cost of development. The training run is the tip of the iceberg in terms of total cost, executives at two top labs told Reuters. The cost to determine how to design that training run can cost magnitudes more money, they said. The paper stated that the training run for V3 was conducted using 2,048 of Nvidia's H800 chips, which were designed to comply with U.S. export controls released in 2022, rules that experts told Reuters would barely slow China's AI progress. Sources at two AI labs said they expected earlier stages of development to have relied on a much larger quantity of chips. One of the people said such an investment could have cost north of $1 billion. Some American AI leaders lauded DeepSeek's decision to launch its models as open source, which means other companies or individuals are free to use or change them. "DeepSeek R1 is one of the most amazing and impressive breakthroughs I've ever seen - and as open source, a profound gift to the world," venture capitalist Marc Andreessen said in a post on X on Sunday. The acclaim garnered by DeepSeek's models underscores the viability of open source AI technology as an alternative to costly and tightly controlled technology such as OpenAI's ChatGPT, industry watchers said. Wall Street's most valuable companies have surged in recent years on expectations that only they had access to the vast capital and computing power necessary to develop and scale emerging AI technology. Those assumptions will come under further scrutiny this week and the next, when many American tech giants will report quarterly earnings. (Reporting by Anna Tong, Jeffrey Dastin and Kenrick Cai in San Francisco and Katie Paul in New York; Editing by Noel Randewich and Christopher Cushing)

Silicon Valley rattled by low-cost Chinese AI

Fears of upheaval in the AI gold rush rocked Wall Street on Monday following the emergence of a popular ChatGPT-like model from China, triggering predictions of turmoil for Silicon Valley and accusations of cheating. Elon Musk, who has invested heavily in Nvidia chips for his company xAI, suspects DeepSeek of secretly accessing banned H100 chips -- an accusation also made by the CEO of ScaleAI, a prominent Silicon Valley startup backed by Amazon and Meta.Fears of upheaval in the AI gold rush rocked Wall Street on Monday following the emergence of a popular ChatGPT-like model from China, triggering predictions of turmoil for Silicon Valley and accusations of cheating. Last week's release of the latest DeepSeek model initially received limited attention, overshadowed by the inauguration of US President Donald Trump on the same day. However, over the weekend, the Chinese artificial intelligence startup's chatbot surged to become the most downloaded free app on Apple's US App Store, displacing OpenAI's ChatGPT. What truly rattled the industry was DeepSeek's claim that it developed its latest model, the R1, at a fraction of the cost that major companies are investing in AI development, primarily on expensive Nvidia chips and software. This development is significant given that the AI boom, ignited by ChatGPT's release in late 2022, has propelled Nvidia to become one of the world's most valuable companies. The news sent shockwaves through the US tech sector, exposing a critical concern: should tech giants continue to pour hundreds of billions of dollars into AI investment when a Chinese company can apparently produce a comparable model so economically? DeepSeek was a poke in the eye to Washington and its priority of thwarting China by maintaining American technological dominance. Trump reacted quickly on Monday, saying the DeepSeek release "should be a wake-up call for our industries that we need to be laser-focused on competing to win." The development also comes against a background of a US government push to ban Chinese-owned TikTok in the United States or force its sale. David Sacks, Trump's AI advisor and prominent tech investor, said DeepSeek's success justified the White House's decision to reverse Biden-era executive orders that had established safety standards for AI development. These regulations "would have hamstrung American AI companies without any guarantee that China would follow suit" which they obviously wouldn't, Sacks wrote on X. Adam Kovacevich, CEO of the tech industry trade group Chamber of Progress, echoed this sentiment: "Now the top AI concern has to be ensuring (the United States) wins." Tech investor and Trump ally Marc Andreessen declared "Deepseek R1 is AI's Sputnik moment," referencing the 1957 launch of Earth's first artificial satellite by the Soviet Union that stunned the Western world. The situation is particularly remarkable since, as a Chinese company, DeepSeek lacks access to Nvidia's state-of-the-art chips used to train AI models powering chatbots like ChatGPT. Exports of Nvidia's most powerful technology are blocked by order of the US government, given the strategic importance of developing AI. "If China is catching up quickly to the US in the AI race, then the economics of AI will be turned on its head," warned Kathleen Brooks, research director at XTB, in a note to clients. Microsoft CEO Satya Nadella took to social media hours before markets opened to dismiss concerns about cheaply-produced AI, saying less expensive AI was good for everyone. But last week at the World Economic Forum in Davos, Nadella warned: "We should take the developments out of China very, very seriously." Microsoft, an eager adopter of generative AI, plans to invest $80 billion in AI this year, while Meta announced at least $60 billion in investments on Friday. 'Outplayed' Much of that investment goes into the coffers of Nvidia, whose shares plunged a staggering 17 percent on Monday. Adding to the turmoil, the esteemed Stratechery tech newsletter and others suggested that DeepSeek's innovations stemmed from necessity, as lacking access to powerful Nvidia-designed chips forced them to develop novel methods. The export controls are "driving startups like DeepSeek to innovate in ways that prioritize efficiency, resource-pooling, and collaboration," wrote the MIT Technology Review. Elon Musk, who has invested heavily in Nvidia chips for his company xAI, suspects DeepSeek of secretly accessing banned H100 chips -- an accusation also made by the CEO of ScaleAI, a prominent Silicon Valley startup backed by Amazon and Meta. But such accusations "sound like a rich kids team got outplayed by a poor kids team," wrote Hong Kong-based investor Jen Zhu Scott on X. In a statement, Nvidia said DeepSeek's technology was "fully export control compliant."

Trump: DeepSeek's AI should be a 'wakeup call' to US industry

MIAMI, Jan 27 (Reuters) - U.S. President Donald Trump said on Monday that Chinese startup DeepSeek's technology should act as spur for American companies and said it was good that companies in China have come up with a cheaper, faster method of artificial intelligence. "The release of DeepSeek, AI from a Chinese company should be a wakeup call for our industries that we need to be laser-focused on competing to win," Trump said in Florida. Investors sold technology stocks across the globe on Monday over concerns the emergence of a low-cost Chinese artificial intelligence model would threaten the dominance of the current U.S.-based AI leaders. "I've been reading about China and some of the companies in China, one in particular coming up with a faster method of AI and much less expensive method, and that's good because you don't have to spend as much money. I view that as a positive, as an asset," Trump said. "I view that as a positive because you'll be doing that too, so you won't be spending as much, and you'll get the same result, hopefully," he said. Trump said Chinese leaders had told him the United States had the most brilliant scientists in the world, and he indicated that if Chinese industry could come up with cheaper AI technology, U.S. companies would follow. "We always have the ideas. We're always first. So I would say that's a positive that could be very much a positive development. So instead of spending billions and billions, you'll spend less, and you'll come up with, hopefully, the same solution," Trump said. Reporting by Nandita Bose; additional reporting by Jeff Mason and Ryan Jones; editing by Chris Reese and Leslie Adler Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial IntelligenceDonald Trump

China heralds DeepSeek as a symbol of AI advancements amid U.S. restrictions

HONG KONG -- An artificial intelligence lab in China has become the latest front in the U.S.-China rivalry, raising doubts as to how much -- and for how much longer -- the United States is in the lead in developing the strategically key technology. The Chinese startup DeepSeek has made waves after releasing AI models that experts say match or outperform leading American models at a fraction of the cost. The meteoric rise of the previously little-known company spooked U.S. investors Monday, wiping out almost $600 billion in the market value of American chipmaker Nvidia in the biggest drop in the nation's market history. In China, DeepSeek is being heralded as a symbol of the country's AI advancements in the face of U.S. export restrictions that Beijing says are aimed at suppressing its technological development. "This jaw-dropping breakthrough has come from a purely Chinese company," said Feng Ji, founder and chief executive of Game Science, the developer behind the hit video game Black Myth: Wukong. "DeepSeek may be a national-level technological and scientific achievement," he wrote in a post on the Chinese social media platform Weibo. Zhou Hongyi, co-founder of the Chinese cybersecurity firm Qihoo 360, said China would "undoubtedly come out on top" in the U.S.-China AI race. "If we are to counter America's AI tech dominance, DeepSeek will definitely be a key member of China's 'Avengers team,'" he said in a video on Weibo. So how did a little-known startup become a global AI sensation? Based in the Chinese tech hub of Hangzhou, DeepSeek was founded in 2023 by Liang Wenfeng, who is also the founder of a hedge fund called High-Flyer that uses AI-driven trading strategies. Liang has said High-Flyer was one of DeepSeek's investors, though it's unclear how much it contributed, as well as a source of some of its first employees. "Our core technical roles are mostly filled by fresh graduates or those with just a year or two of work experience," he told the Chinese media outlet 36Kr in May 2023, adding that the company was looking for "down-to-earth individuals with curiosity." By 2022, High-Flyer had acquired 10,000 of Nvidia's high-performance A100 graphics processor chips, according to a post that July on the Chinese social media platform WeChat. The U.S. imposed restrictions on sales of those chips to China later that year. Liang told 36Kr that he acquired the chips mostly because of "curiosity about the boundaries of AI capabilities" and that he had no particular commercial goal in mind. The stock market rout took place a week after DeepSeek's Jan. 20 release of an open-source language model called R1, which met with widespread acclaim in what venture capitalist Marc Andreessen called "AI's Sputnik moment." Investors and the U.S. tech industry were further unnerved later in the week when DeepSeek published a technical report that said the model took only two months and less than $6 million to build, compared with the billions spent by leading U.S. tech companies. The surge in interest sent DeepSeek's recently released app to the top of Apple's App Store on Monday. The company later said that it was temporarily limiting user registrations "due to large-scale malicious attacks" on its services, CNBC reported. New users were quick to note that R1 appeared subject to censorship around topics deemed sensitive in China, avoiding answering questions about the self-ruled democratic island of Taiwan, which Beijing claims is part of its territory, or the 1989 Tiananmen Square crackdown or echoing Chinese government language. The model appears to operate without such restrictions, however, if it is used not through the DeepSeek website but on servers that host it outside mainland China. DeepSeek did not respond to a request for comment Tuesday. The R1 model is now second only to California-based OpenAI's o1 in the artificial analysis quality index, an independent AI analysis ranking. It also beats leading models by Google, Meta and the California-based Anthropic. Liang, who according to the China's media is about 40, has kept a relatively low profile in the country, where there has been a crackdown on the tech industry in recent years amid concerns by the ruling Chinese Communist Party that its biggest companies and executives might be getting too powerful. But he appeared on state television last week during a high-profile meeting with Premier Li Qiang, China's No. 2 official, who invited Liang and other experts from technology, education, science and other fields to share their opinions for a draft government work report. At the meeting, Li called for "technological innovation" to foster the economy, according to state media reports. China has made AI a national priority, with the goal of becoming the global leader in its technology by 2030. The U.S., concerned about the potential military applications, has moved to limit China's access to American technology, including new restrictions on AI chips issued by Joe Biden in the final days of his presidency. President Donald Trump said Monday that DeepSeek's rise "should be a wake-up call" for U.S. tech companies. The Chinese Foreign Ministry referred a request for comment Tuesday to the relevant department. R1 has also drawn attention because, unlike OpenAI's o1, it is free to use and open-source, meaning anyone can study and copy how it was made. Most Chinese engineers are eager for their open-source projects to be used by foreign companies, especially those in Silicon Valley, in part because "no one in the West respects what they do because everything in China is stolen or created by cheating," said Kevin Xu, the U.S.-based founder of Interconnected Capital, a hedge fund that invests in AI. "They are also aware that Chinese firms have been taking for free lots of open-source tech to advance," Xu, the former senior director for global expansion at GitHub, said Monday in a post on X, "but they want to create their own, contribute, and prove that their tech is good enough to be taken for free by foreign firms -- some nationalism, some engineering pride." DeepSeek is not the only Chinese AI startup that says it can train models for a fraction of the price. Kai-Fu Lee, founder of 01.AI, has said that it cost $3 million to train its model and that U.S. restrictions on chip exports forced his company to innovate. "The Chinese companies are able to watch the innovations, make some themselves and then do better engineering," Lee, a former president of Google China, said at a conference in Saudi Arabia in October. "When you do excellent, detailed engineering, it is not the case you have to spend a billion dollars to train a great model."

Trump calls China's AI DeepSeek breakthrough 'a wakeup call' -- but...

DORAL, Fla. -- President Trump on Monday called the new Chinese AI platform DeepSeek a "wakeup call" for America -- while also saying its debut could be a "positive" development if it actually works more cheaply than US competitors. "I've been reading about China and some of the companies in China, one in particular, coming up with a faster method of AI and much less expensive method," Trump, 78, said in an address to House Republicans. "And that's good because you don't have to spend as much money. I view that as a positive, as an asset. So I really think -- if it's if it's fact, and if it's true, and nobody really knows what it is -- but I view that as a positive, because you'll be doing that too," Trump said. "So you won't be spending as much, and you'll get the same result hopefully. The release of DeepSeek, AI from a Chinese company, should be a wake up call for our industries that we need to be laser focused on competing to win." Trump addressed the development after DeepSeek's claims of cheaper AI caused the Nasdaq Composite to slip more than 3% Monday -- as AI chipmaker NVIDIA's stock tanked almost 17%. "I would say that's a positive that could be very much a positive development. Instead of spending billions and billions, you'll spend less than you come up with, hopefully the same solution," Trump said. The Chinese company said it spent a paltry $5.6 million coming up with its AI -- a drop in the bucket compared to leading US firms' investment -- and claimed to use relatively inexpensive chips to do it. The new offering instantly surged to be a top download on app platforms Monday.

DeepSeek: Trump warns of 'wake-up call' for US tech firms

DeepSeek is powered by the open source DeepSeek-V3 model, which its researchers claim was trained for around $6m (£4.2m) - significantly less than the billions spent by rivals. But this claim has been disputed by others in AI. Its emergence comes as the US is restricting the sale of the advanced chip technology that powers AI to China. To continue their work without steady supplies of imported advanced chips, Chinese AI developers have shared their work with each other and experimented with new approaches to the technology. This has resulted in AI models that require far less computing power than before. It also means that they cost a lot less than previously thought possible, which has the potential to upend the industry. "DeepSeek's ability to rival US models despite limited access to advanced hardware demonstrates that software ingenuity and data efficiency can compensate for hardware constraints," says Marina Zhang, an associate professor at the University of Technology Sydney, who focuses on China's high-tech industries, told the BBC After DeepSeek-R1 was launched earlier this month, the company boasted of "performance on par with" one of OpenAI's latest models when used for tasks such as maths, coding and natural language reasoning. DeepSeek's technology has been praised by high profile figures including OpenAI chief Sam Altman who called it "an impressive model, particularly around what they're able to deliver for the price", though he added that OpenAI would "obviously deliver much better models" moving forward. The Chinese company claims its model can be trained on 2,000 specialised chips compared to an estimated 16,000 for leading models. But not everyone is convinced. Some have cast doubt on some of DeepSeek's claims, including tech mogul Elon Musk. He responded to a post which claimed that DeepSeek actually has around 50,000 Nvidia chips that have now been banned from expert to China, saying: "Obviously."

Trump calls DeepSeek a wake-up call for America

Washington | US President Donald Trump said Chinese AI startup DeepSeek's technology is a wake-up call for American companies that should spur them to innovate at lower cost. The US president put an optimistic spin on the Chinese company, as investors sold technology stocks across the globe on Monday (Tuesday AEDT) on concerns the emergence of the low-cost artificial intelligence model would threaten the dominance of US leaders like chipmaker Nvidia.

DeepSeek poses grave risk to US economy -- unless we unleash American...

If you believe the hype, something called DeepSeek, a Chinese artificial intelligence company, just leapfrogged the world. It can do AI cheaper and better than established players like America's Nvidia, which is why about $500 billion in market cap came out of the reigning AI king by noon on Monday. It's also why the tech heavy Nasdaq imploded more than 3% even before lunchtime. I'm skeptical about the DeepSeek threat. I'm not saying it's a deep fake, but I just don't trust anything that comes out of China. But DeepSeek is a warning, a stark one, for corporate America and policy makers in the Trump Administration. The AI model it has developed may or may not be as good as the homegrown variety just yet, but what is undeniable is China's intention to play hardball in the war for tech and economic dominance. Unless American business and policy makers are ready to unleash the full force of American exceptionalism, we will lose. Here's some good news: Policy makers in the new Trump White House clearly understand this threat on multiple fronts. The Trump Administration has set up an AI task force, led by techie David Sacks, to streamline regulatory burdens put in place by the Biden Administration -- which was freaking out thinking AI would replace humans in every conceivable area of employment. When an algorithm can come up with information five-hundreds times faster than the typical human there will be some displacement. But -- and this is a big but -- humans will be needed to create AI, to manufacture the chips that are used to make AI work, and they will be needed in all those industries that will grow and prosper as AI leads to productivity gains never seen before. The Trump people get something else: We are rapidly losing our edge in technology and beyond because the thing that has made this country great -- a fully functioning meritocracy -- has been severely weakened by "woke" politics, including an insidious practice in hiring and promotion known as Diversity Equity and Inclusion. No one is against diversity of course. But DEI as it is practiced in corporate America, literally subjugates merit for it. It's a crude form of reparations, consequences be damned. Joe Biden's entire four years as president was built on DEI right up to whom he appointed as his vice president (his words). It filtered to federal contracting, which imposed those standards writ large on corporations that hiring and promotion must be done on intersectional terms that far outweighed merit. A whole DEI industry was created to enforce these absurd and illegal measurements. And what did we get? As a country, cultural division. As an economy, a weakened meritocracy that is eating away at our economic dominance in the face of the China threat. That's why Trump has wasted no time ending DEI in the federal government and alerting corporate America it must do so as well. Team Trump, I am told, understands it's one thing to lose our shirts in the making of shirts against China. But if we lose the tech war -- and by extension the battle over AI as it creates advances in medicine, as it powers how we consume news and knowledge and prepares our military when necessary -- we are toast as a superpower. DeepSeek is a warning that unless we unleash American exceptionalism, China will Deep Six the US economy.

The Alarming National Security Implications of DeepSeek and China's A.I. Breakthrough

A Chinese A.I. upstart stuns markets, rattles the Pentagon, and threatens to upend America's grand plans for technological dominance. Wall Street started the week in a cold sweat thanks to DeepSeek, an obscure Chinese A.I. lab that just dropped a bombshell: a lightning-fast, budget-friendly large language model that's shaking Silicon Valley to its core. The Hangzhou-based firm claims to have developed it over just two months at a cost under $6 million, using reduced-capability chips from Nvidia (NVDA), whose stock dropped by more than 15 percent early Monday (Jan. 27). If this newcomer, established in mid-2023, can produce a reliable A.I. model that's cheaper and faster than existing apps, that's a stunning blow to U.S. firms such as OpenAI, Anthropic and Meta (META). DeepSeek's new A.I. app is already available online, including at Apple's app store, and it's moving fast. Sign Up For Our Daily Newsletter Sign Up Thank you for signing up! By clicking submit, you agree to our <a href="http://observermedia.com/terms">terms of service</a> and acknowledge we may use your information to send you emails, product samples, and promotions on this website and other properties. You can opt out anytime. See all of our newsletters The timing of this couldn't be worse for American business, given President Donald Trump's audacious announcement last week of a new $500 billion initiative termed Stargate AI, involving OpenAI, SoftBank (SFTBF) and Oracle, which Trump promised would ensure "the future of technology" for America, creating hundreds of thousands of jobs in the process. Has that promising vision already evaporated? It's too soon to say, but it's now evident that America and China are in a tight race to harness the power of A.I. for the world. Comparisons to the U.S.-Soviet Cold War "space race" are impossible to miss, and many are comparing DeepSeek's innovation to the Soviet launch of Sputnik, the first artificial satellite, in 1957, which shocked Americans with the realization that Moscow reached space before we did. Like Sputnik, DeepSeek's claimed progress has alarming national security implications. While Wall Street is worried about valuations, the Pentagon is fretting over Chinese advances in A.I. that may give the People's Liberation Army an edge in warfare. Given how top U.S. military leaders assess that our increasingly open conflict with Beijing may devolve into severe fighting during Trump's second term, this is no idle threat. The Pentagon's interest in A.I. and its military implications is hardly new. Five years ago, the Department of Defense's Joint Artificial Intelligence Center was expanded to support warfighting plans, not just experiment with new technology. Last year, Craig Martell, the Pentagon's top A.I. official, pronounced that new technology was revolutionizing how DoD does business. As Martell explained: "Imagine a world where combatant commanders can see everything they need to see to make strategic decisions ... Imagine a world where those combatant commanders aren't getting that information via PowerPoint or via emails from across the [organization] -- the turnaround time for situational awareness shrinks from a day or two to ten minutes." While the vaunted "fog of war" can never be fully lifted, A.I. promises to cut through the haze faster and with a precision never seen in the history of warfare. A.I. will reduce the information burden on military staff with speed and accuracy, enabling a tighter "decision loop" for U.S. generals and admirals. If DeepSeek's innovation is all it's being sold as, Beijing may have gained a decisive advantage that will enable the PLA to out-think and outmaneuver the U.S. military in any confrontation in the Western Pacific, most likely over Taiwan. The U.S. Intelligence Community is just as concerned about China's A.I. progress. In recent years, America's spy agencies have spent prodigious sums on determining how to harness A.I. to boost the speed and accuracy of intelligence assessments. A.I. can tamp down the "information firehose" that hampers the speedy analysis of complex intelligence problems, employing technology to make human assessments faster and more precise. Last summer, Lakshmi Raman, the Central Intelligence Agency's top A.I. official, illuminated how this works. "Imagine all of the news stories that come in every minute of every day from around the world. That is also the data that we are neck deep in, and that we've got to leverage A.I. in order to help us to triage," she explained, adding that A.I. was boosting CIA's clandestine intelligence collection, not just analysis. The National Security Agency, too, has embraced A.I. with gusto, recognizing its game-changing potential for sifting through vast amounts of collected intelligence data to find the puzzle pieces of national security value. NSA is also protecting America from foreign A.I. programs, and the agency recently established the Artificial Intelligence Security Center. As NSA's Director General Timothy Haugh stated, "When an enterprise runs A.I. systems, it opens up to new attack surfaces in the AI development lifecycle and A.I. abilities in model inference services. We need to secure and protect these systems from threats and buy down risks today." That threat from foreign A.I. just got a boost with DeepSeek's claimed progress. The good news here is that nobody's certain of how real China's A.I. progress actually is. Communists lie frequently. The Soviet success with Sputnik, boosted by Moscow's putting Yuri Gagarin in space in 1961, a month before America did the same, proved illusory. The Soviet space program was hampered by quality and safety problems, and despite early Kremlin propaganda feats, America won the space race with the 1969 Moon landing. The bad news is that the clock's ticking. John R. Schindler served with the National Security Agency as a senior intelligence analyst and counterintelligence officer

DeepSeek AI shakes American swagger and upends assumptions

The speed at which the new Chinese AI app DeepSeek has shaken the technology industry, the markets and the bullish sense of American superiority in the field of artificial intelligence (AI) has been nothing short of stunning. Venture capitalist Marc Andreessen may have said it best. "DeepSeek-R1 is AI's Sputnik moment," he posted to X on Sunday, referring to the satellite which kicked off the space race. DeepSeek was the most downloaded free app on Apple's US App Store over the weekend. By Monday, the new AI chatbot had triggered a massive sell-off of major tech stocks which were in freefall as fears mounted over America's leadership in the sector. Shares of AI chip designer and recent Wall Street darling Nvidia, for example, had plunged by 17% by the time US markets closed on Monday. Or to put it in even starker terms, it lost nearly $600bn in market value which, according to Bloomberg, is the biggest drop in the history of the US stock market. This extraordinary, historic spooking can largely be attributed to something as simple as cost. And a claim by DeepSeek's developers which prompted serious questions in Silicon Valley. While ChatGPT-maker OpenAI has been haemorrhaging money - spending $5bn last year alone - DeepSeek's developers say it built this latest model for a mere $5.6m. That is a tiny fraction of the cost that AI giants like OpenAI, Google, and Anthropic have relied on to develop their own models. As this dramatic moment for the sector played out, there was a palpable silence in many corners of Silicon Valley when I contacted those who are usually happy to talk. Many observers, investors, and analysts appeared stunned. Some wondered if this marked a buying opportunity. Others questioned the information DeepSeek was providing. "I still think the truth is below the surface when it comes to actually what's going on," veteran analyst Gene Munster told me on Monday. He questioned the financials DeepSeek is citing, and wondered if the startup was being subsidised or whether its numbers were correct. The chatbot is "surprisingly good, which just makes it hard to believe", he said. Regardless, DeepSeek's sudden arrival is a "flex" by China and a "black eye for US tech," to use his own words. It was just last week, after all, that OpenAI's Sam Altman and Oracle's Larry Ellison joined President Donald Trump for a news conference that really could have been a press release. The event represented peak American bullishness on AI.

DeepSeek shakes up AI world: $1 trillion vanishes from US markets

In an earth-shaking moment for the global AI race, Chinese firm DeepSeek unveiled its AI chatbot, sending shockwaves through US tech markets. The Nasdaq plunged 3%, erasing $1 trillion in value as investors reeled from the news. Heavyweights like Nvidia and Google took massive hits, with Nvidia losing its crown as America's most valuable company after its shares nosedived by a record-breaking 17%. DeepSeek's secret? Cost-efficient models that outperform industry leaders using downgraded chips, a move that undermines years of US dominance in AI. While some see this as AI's Sputnik moment, others question whether American firms have overinvested in expensive AI infrastructure. This Chinese breakthrough suggests the US may face stiff competition despite sanctions and billion-dollar budgets.

DeepSeek Turned the AI World on Its Head, but Don't Fall For The Hype Just Yet

Entrepreneur Marc Andreessen made that bold claim on X, the social media platform formerly known as Twitter, this past Sunday. Silicon Valley, along with the stock market and online prognosticators, are all reeling from what seems to be seismic-level activity in the AI space. DeepSeek AI, a new AI model from China that's jumped to the top of the Apple App Store, is sending reverberations throughout Silicon Valley. DeepSeek claims its AI competes with, and in some cases outperforms, OpenAI's o1 reasoning model at a fraction of the cost. Not only that, DeepSeek's R1 model is completely open source, meaning the code is openly accessible and anyone can use it for free. A key differentiator between DeepSeek-R1 and OpenAI's o1 is that R1 allows you to see its chain of thought. It's incredible insight into how the AI "thinks." You can actually see it trying to answer questions about Tiananmen Square before it cancels its response, midway. Nvidia, the company making the chips powering the AI revolution, saw its stock plunge 18% and lose a record $600 billion after DeepSeek's weekend ascent. It makes sense. If what DeepSeek says is true, it's achieving near o1-level performance on apparently older Nvidia chips while spending a small percentage of the cost. Commenters online are still trying to make sense of DeepSeek's sudden emergence in the AI marketplace. Is it actually performant with o1 at a lower cost? To what extent can claims by DeepSeek and China be true regarding efficiencies? Do the cost savings come from a major technical unlock, or are other areas in China's supply chain making it cheaper to use? Regardless, R1 is impressive. "This affordability opens the door for smaller companies and startups to leverage advanced AI technology that was previously inaccessible," said Mel Morris, CEO of Corpora AI, an AI research engine, in a statement to CNET. Morris added that DeepSeek poses competition to established AI players and its "presence is likely to spur faster advancements in AI technology, leading to more efficient and accessible solutions to meet the growing demand." It could be why OpenAI CEO cut prices for its near-top-end o3 mini queries on Saturday. As Big Tech is continually throws billions of dollars, processing power and energy at AI, DeepSeek's efficiency unlock could be akin to the kind of leap we saw when cars went from carburetors to fuel injection systems. Unlike OpenAI, DeepSeek's R1 model is open source, meaning anyone can use the technology. It's a major disruption to the marketplace, currently dominated by OpenAI's ChatGPT and Google's Gemini, both of which are closed and require users to pay to gain full access to their suite of features. In the AI race between the US and China, America has stayed ahead thanks to Silicon Valley's massive investment dump and the government's blockade on Nvidia selling the latest AI chips to China. However, that blockade might have only incentivized China to make its own chips faster. Money, plus protectionism, was seen as a way to keep China in second place, making the world reliant on American technology. That dynamic may have shifted. Now, consumers and corporations worldwide have access to a highly performant "reasoning" model at a fraction of the cost. Not only that, TikTok parent company ByteDance released an even cheaper model to R1. As markets and social media react to new developments out of China, it might be too early to say America has been beaten. But at the very least, China is catching up quickly. "China has produced GPT-4 quality models already, but there was a longer lag in time -- like it took a year, a year and a half, something like that. But now there is a Chinese model, which perhaps is only six months behind, and I think that is a difference," said Lucas Hansen, co-founder of CivAI, a nonprofit that uses software to demonstrate what AI is capable of. "So, the US still has a lead, but it's not as large as it previously was." One thing that'll certainly help AI companies in catching up to OpenAI is R1's ability for users to read its chain of thought. Even if R1 doesn't get every answer right, being able to see how it reasons can better help develop it. The "shock and awe" people are feeling with R1 comes from the ability to read its chain of thought, according to Hansen. It's insight OpenAI hasn't given access to with its o1 model, as hiding the secret sauce keeps people shelling out a monthly subscription cost for access. Still, there's a level of skepticism that should be taken with R1's cost-to-performance ratio. The white paper that DeepSeek published had more than 100 co-authors. That's a lot of brainpower to train an AI for the low cost of $5.5 million. That $5.5 million cost might just be the energy costs to train the model, minus every researchers' individual salaries, but China hasn't been fully transparent on how it calculated these energy costs. The cost of setting up a data center in China likely differs from setting up one in the US. And, it's uncertain if costs were subsidized by a cloud provider or the Chinese government itself, according to Hansen. There's also skepticism on the chips DeepSeek used to train its model. Is the firm actually using older Nvidia A100 and H800 chips or is China accessing the latest H100 chips through other means, as said by Alexandr Wang, CEO of Scale AI. Even if we take that $5.5 million figure as a highly conservative estimate, it's still significantly less than the $100 million it cost OpenAI to train GPT-4, the companies previous AI model. OpenAI hasn't released figures on what it cost to build o1, but given its much higher token cost for customers, it was likely more expensive. "With data center load in the United States expected to double or triple by 2030, any efficiency savings can have a significant impact," said Mark James, interim director of the Institute of Energy and the Environment at Vermont Law and Graduate School in a statement. Already, utilities are being stressed by the high energy demands of AI. If DeepSeek's claims are correct, then it could greatly lighten the potential electricity load, easing stress on both consumers and the environment. "On the flip side," James said, "more efficient models could unlock even more growth in the sector, which would mitigate efficiency savings and exacerbate the stress on our grid." Claims that the US has lost the AI war might be premature. At the very least, the landscape has instantly become more competitive and there's room for continued innovation. DeepSeek also doesn't mean that the world is on the precipice of achieving artificial general intelligence, or super advanced AI that's smarter than humans and can teach itself. "I don't think DeepSeek brings us one millimeter closer to Artificial General Intelligence (AGI), but I do think it brings us closer to commercially viable large language model (LLM) applications which is fantastic," said Ben Goertzel CEO of the Artificial Superintelligence (ASI) Alliance and the Founder of SingularityNET. DeepSeek still has the same cognitive limitations as other AI models. Despite that, DeepSeek's efficiencies could democratize AI further.

How Chinese DeepSeek can be as good as US AI rivals at fraction of cost

Based on the limited numbers of comparisons made so far, DeepSeek's AI models appear to be faster, smaller, and a whole lot cheaper than the best offerings from the supposed titans of AI like OpenAI, Anthropic and Google. And here's the kicker, the Chinese offering appears to be just as good. So how have they done it? Firstly, it looks like DeepSeek's engineers have thought about what an AI needs to do rather than what it might be able to do. It doesn't need to work out every possible answer to a question, just the best one - to two decimal places for example instead of 20. Their models are still massive computer programmes, DeepSeek-V3 has 671 billion variables. But ChatGPT-4 is a colossal 1.76 trillion. Doing more with less seems to be down to the architecture of the model, which uses a technique called "mixture of experts". Where OpenAI's latest model GPT-4.0 attempts to be Einstein, Shakespeare and Picasso rolled into one, DeepSeek's is more like a university broken up into expert departments. This allows the AI to decide what kind of query it's being asked, and then send it to a particular part of its digital brain to be dealt with. This allows the other parts to remain switched off, saving time, energy and most importantly the need for computing power. And it's the equivalent performance with significantly less computing power, that has shocked the big AI developers and financial markets. The state-of-the-art AI models had been developed using more and more powerful graphics processing units (GPUs) made by the likes of Nvidia in the US. Read more: AI no longer contest between Californian tech bros DeepSeek 'wakeup call' for US, says Trump The only way to improve them, so the market logic went, was more and more "compute". Partly to stay ahead of China in the AI arms-race, the US restricted the sale of the most powerful GPUs to China. What DeepSeek's engineers have demonstrated is what engineers do when you present them with a problem. They come up with a workaround. Learning from what OpenAI and others have done, they redesigned a model from the ground up so that it could work on GPUs designed for computer games not superintelligence. What's more, their model is open source meaning it will be easier for developers to incorporate into their products. Being far more efficient, and open source makes DeepSeek's approach look like a far more attractive offering for everyday AI applications. The result, of course, a nearly $600bn overnight haircut for Nvidia. But it will survive its sudden reverse in fortunes. The LLM-type (large language model) models pioneered by OpenAI and now improved by DeepSeek aren't the be-all and end-all in AI development. "General intelligence" from an AI is still a way off - and lots of high end computing will likely be needed to get us there. The fate of firms like OpenAI is less certain. Their supposedly game-changing GPT-5 model, requiring mind-blowing amounts of computing power to function, is still to emerge. Now the game appears to have changed around them and many are clearly wondering what return they're going to get on their AI investment.

DeepSeek: The New Sputnik Moment on AI

That's the word for the news that the Chinese Communists are further along than expected on artificial intelligence. At a time when the West, and Corporate America, are reeling from competition from Communist China, the news that Beijing is further along than expected on Artificial Intelligence is a jolt. Some invoke the specter of Sputnik, as the news raises "questions about the future of America's AI dominance," per the BBC. It suggests the scale of the challenge ahead as America and its allies aim to compete with China on defense while keeping close trade ties. Those two aims look increasingly incompatible, reflecting a dilemma that was never as applicable as in the case of the Soviet Union. Trade links between Russia and America at the outset of the Cold War were negligible, as George Kennan pointed out in 1947 when he heralded what would be the Containment strategy. America had "no investments to guard, no actual trade to lose, virtually no citizens to protect, few cultural contacts to preserve." So in 1957 it was a no-brainer to mobilize America's education system to meet the threat posed by a Soviet satellite beating the West into orbit. General Motors was not clamoring to sell Buicks in the suburbs of Leningrad, nor did IBM harbor hopes of hawking mainframes at Moscow. Efforts now to "decouple" China and America are hampered in part by the fact that Western supply networks have grown dependent on Chinese-made goods. Yale economist Stephen Roach goes so far as to describe the bond between America and China as "codependency." If so, it is one in which Beijing's mercantilist policies -- measured, say, by its record-breaking $1 trillion trade surplus in 2024 -- are tilting the relationship toward the Middle Kingdom's side of the ledger. This is not what architects of deeper trade ties with China had in mind when Beijing was given Most-Favored-Nation status in 2000. President Clinton crowed then that it would "advance our own economic interests." He added: "Economically, this agreement is the equivalent of a one-way street," explaining that "it requires China to open its markets" to America "in unprecedented new ways." Plus, too, Mr. Clinton promised, "We'll be able to export products without exporting jobs. Meanwhile, we'll get valuable new safeguards against any surges of imports from China." Buried in the fine print, though, when American and Western nations raced to do business in China, were the requirements that forced foreign companies to turn over their trade secrets. Foreign auto makers, like General Motors, were let "into the country only as part of a publicly stated, long-term policy to gain technology and build its own globally competitive industry," the New York Times recently reported. Now, GM has been overtaken by Chinese rivals. Beijing's requirements that foreign companies "partner" with local companies led to the vast transfer to the communist regime of Western technology and intellectual property. In 2018, the Times reported that "foreign companies have long complained that they are simply training future rivals." Meanwhile, far from being a boon for working Americans, opening trade ties with China led to the loss of some 6 million manufacturing jobs -- the "China Shock." That's the context in which to view the news of China's apparent strides in AI. The Chinese firm DeepSeek astonished the tech world -- and rattled markets -- by presenting what Silicon Valley venture capitalist Marc Andreesen calls "one of the most amazing and impressive breakthroughs I've ever seen." What's particularly spooked American tech firms is that China is making these gains on the cheap, at a fraction of the cost envisioned here in the States. While it's too soon to know how this will impact the race to master AI, the news is sobering in light of expectations that the new technology could play a decisive role in future phases of economic development, not to mention the defense and security applications that are of importance to America's global standing. If DeepSeek is shaping up as a new Sputnik moment, it speaks to the urgency of reappraising America's trade relationship with China.