By Armin Sijamić
In a few days, the Chinese company DeepSeek wiped out billions of dollars in value from its American competitors. The background of the story is akin to the space race between Washington and Moscow during the Cold War, and the implications could be felt for decades worldwide.
The importance of artificial intelligence (AI) is growing every day. Advanced technologies are changing the world, and in the case of artificial intelligence, it is said that with its development, humans are becoming an almost unnecessary link. That is why mastering these technologies is the ultimate goal of the major powers, because without artificial intelligence, it will be impossible to imagine the future of, for example, the economy or the military.
There is no longer any doubt that China is America's greatest rival. American strategists and officials, in their statements and government documents, state that China is the only rival capable of winning on the ideological, economic, and technological fronts. Such assessments from Washington have not applied to Russia for decades.
The US-China confrontation has begun. President Barack Obama advocated for it, and Donald Trump initiated sanctions against Chinese tech giants during his first term. Joseph Biden continued with regulations preventing Chinese companies from accessing the best American chips, and Trump, in his second term, is launching Stargate – a megaproject for artificial intelligence worth at least 500 billion dollars, with the aim of the US remaining the leading power in technology.
China's Response
Although the authorities in China encourage the population to contribute to the country's development with new ideas, some moves can be attributed solely to the authorities, even if stated otherwise. The introduction of the relatively small company DeepSeek to the wider public coincided with Trump's arrival in power. Shortly before, DeepSeek's AI Assistant application was launched on the market and quickly became the highest-rated free application on Apple's App Store, surpassing the competitor ChatGPT.
The development of the application cost 5.2 million euros. This is 95 percent cheaper than in the case of competitor OpenAI or a hundred times cheaper than the chatbot ChatGPT. Behind the company is entrepreneur Liang Wenfeng, born in 1985, a student at a Chinese university, who began buying chips from the American company Nvidia in 2021 and founded DeepSeek two years later. The drop in market value of Nvidia, with the emergence of DeepSeek, was the largest in the history of the American stock exchange.
Using older types of chips, as the newer version used by American companies was banned for export to China by Biden, Liang Wenfeng shook the American stock markets and tech giants, and led Trump to say that American scientists should spend less money on AI. Billions of dollars in company value were wiped out from the American stock markets, and Trump's donor, advisor, and investor Marc Andreessen wrote on social network X that it was a "Sputnik moment" in the world of artificial intelligence, referring to the shock in Washington when the Soviet Union launched a satellite into Earth's orbit.
Those who tested DeepSeek and its American competitors side-by-side said that the Chinese model had better results in solving complex problems, coding, and mathematics. In addition, DeepSeek requires significantly fewer resources than its competitors, including the number of chips, electricity consumption, or the learning process, i.e., training. Considering that billions of dollars have been spent in the United States for years, attracting experts from all over the world, the Chinese achievement is more impressive.
Liang Wenfeng is not the only Chinese competitor. According to available data, there are at least four Chinese companies believed to have developed AI models comparable to the leading American ones. Knowing China's secrecy, it would not be surprising if, in addition to these, there are many other AI models, likely more advanced, and that the state is using them.
Political Implications
With DeepSeek, China has shown Washington that sanctions have not stopped it and that it is ready for new confrontations. The fact that this application is free, while some American ones charge twenty dollars a month for use, is an important point. People around the world, even in the poorest countries, now have an AI tool available. This means that DeepSeek will also be improved through its own learning from the data it collects from its users worldwide.
China has shaken Trump's inner circle. Some of his main supporters are from companies that have lost hundreds of billions of dollars with the launch of DeepSeek. This act has led some other people to question whether it is justified to spend so much on AI, as the invested money may never be returned.
The money may not be returned, but the influence that can be gained by leading in this technology is an opportunity that the governments of major powers do not want to miss. With the mass adoption of modern technologies, many authors believe, people's lives will be forever changed.
Strategists in Washington have now realized that the US is not the only one capable of doing this, but that China has also attacked American tech giants that have shaped the world in recent years. What Russia, for example, cannot even dream of doing, China has been doing for years. Here are just a few examples.
Huawei produces high-quality mobile phones, challenging Apple, while simultaneously becoming a leader in 5G technology. Chinese electric car manufacturer BYD has surpassed the American company Tesla in a short period. CATL lithium batteries, along with the aforementioned BYD, hold over fifty percent of the global market, and six of the top ten companies on that list are Chinese. DJI Chinese drones are favored on both sides of the front in today's biggest war (the war in Ukraine), and TikTok is incredibly popular in the United States.
In recent years, China has transformed into a global technological power, combining economic strength and modern technologies. Examples include the success of companies like Alibaba, Temu, Shein, the development of space technology, or huge infrastructure projects at home and around the world.
Although many have warned about China's development for years, a large part of the American public was preoccupied with other issues. DeepSeek's success has shaken many. Trump was explicit that this is a challenge for American experts to work more and cheaper, which means redefining their plans. Some have already speculated on social media that Trump might force DeepSeek into compliance, as in the case of TikTok, or simply ban the application and impose sanctions.
There is no doubt that the United States will respond to this Chinese success, as will the largest American technology companies, which are unrivaled in the world in this field. Some of them have already stated that they believe DeepSeek has improperly taken their solutions, but that they will investigate the entire case.
In an interview with Chinese media, Liang Wenfeng stated that China is one to two years behind American companies in the development of artificial intelligence. It is difficult to assess whether this is true, but there is no doubt that China is the only country currently capable of rivaling the United States in areas where the world's greatest power has dominated for decades.
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