Chethana Janith, Jadetimes Staff
C. Janith is a Jadetimes news reporter and sub-editor covering science and geopolitics.
DeepSeek's rise demonstrates China's AI capabilities and challenges US technological dominance, highlighting the limitations of sanctions and reshaping global leadership.
It also underscores China's resilience and its capability to effectively counteract the US where it matters the most.
Deepseek has taken the US by storm
The arrival of DeepSeek led to a US$590 billion decline in the market value of Nvidia, a US-based tech company that claims to be the “world leader in Artificial Intelligence Computing.” Clearly, DeepSeek – a massive model that can provide information at a much lower cost than its competitors – has upended this claim. Overall, DeepSeek wiped US$1 trillion off US stocks. This is in addition to the fact that DeepSeek topped the Apple app store in the West last weekend, indicating its rapid acceptance and a mass shift from US-based AI sources to China-based AI sources.
Elsewhere in Europe, the pan-European Stoxx 600 fell on Monday, and major European technology stocks were down. The Dutch chipmaker ASML slid by 7%, while Germany’s Siemens Energy, which provides hardware for AI infrastructure, was down nearly 20%, and France’s digital automation company Schneider Electric fell by 9.5%. The meltdown was not surprising at all.
A report in The Guardian noted in August how US tech companies were investing too much in AI but yielding too little benefit from it. China, however, outsmarts the scale of investment in the US by far. This is despite the many sanctions the US imposed on China’s access to technology. In May 2019, for instance, the Trump administration signed an executive order aimed at blocking China’s access. It stated that “foreign adversaries are increasingly creating and exploiting vulnerabilities in information and communications technology and services, which store and communicate vast amounts of sensitive information, facilitate the digital economy, and support critical infrastructure and vital emergency services, in order to commit malicious cyber-enabled actions, including economic and industrial espionage against the United States and its people.” Several similar steps followed in subsequent years, but DeepSeek is undeniable proof of their collective failure.
For instance, Nvidia’s most advanced chips, H100s, have been banned from export to China since September 2022 by US sanctions. Nvidia then developed the less powerful H800 chips for the Chinese market, although they were also banned from export to China last October. DeepSeek’s success in building an advanced AI model without access to the most cutting-edge US technology has raised concerns about the efficacy of Washington’s attempts to stymie China’s hi-tech sector.
How China Pulled It Off
Ironically, US sanctions to limit China’s access to technology pushed Beijing to strive for self-sufficiency. This is not to suggest that China began to push for self-sufficiency solely due to US sanctions. In fact, Beijing had long understood the importance of self-sufficiency in this crucial field. Since 2015, it has been seeking to increase self-reliance from 10% to 75% by 2030. DeepSeek’s success is evidence of rapidly increasing self-sufficiency. Outsmarting other economies globally, China has invested US$150 billion in its domestic semiconductor industry. Rare earth minerals that are crucial to the development of this technology also have a significant Chinese footprint. Beijing controls 80% of the worldwide refining capacity of these minerals.
With China, there is no shortage of technical expertise – something that no sanction regime can block. China trains four million engineering graduates annually, more than the rest of the world combined. Thanks to its centrally planned economy, Beijing can quickly invest in critical areas requiring immediate attention. It is not necessarily troubled by the need to increase financial returns that US-based companies like Nvidia, Microsoft, Apple, and Meta must consider to stay relevant and competitive. Even though the US government began its own investment programme in 2022 through the CHIPS Act, it allocated only US$53 billion in federal incentives, far less than what China has already invested. Given the low cost of production, China, unlike the US, has already achieved economies of scale in producing AI.
Future of US Hegemony
Besides the shock to the US economy and tech industry, the success of DeepSeek has raised serious questions about the US's ability to ‘lead’ the world in a politico-military sense. It has put US President Trump in a very difficult situation. His ambition to ‘Make America Great Again’ has become much more challenging due to DeepSeek.
With China becoming the newest center of technological development, questions about the locus of global military power are also arising. Can the US, without its technological dominance, outsmart its rivals? Can the US, without this ability, impose unilateral policies worldwide?
There is also a natural attraction for countries worldwide to look up to the ‘Chinese model’ rather than the US model of technology, with the number of students/engineers seeking to study in Chinese universities expected to rise soon.
The rise of DeepSeek has proven US policies wrong. But this is also an opportunity for Washington to reflect deeply on its policies. The more it tries to restrict the flow of technology, the freer it will become. In an interview with Chinese media, DeepSeek’s Liang said, “AI should be affordable and accessible to everyone.” This is ironic from the US/Western perspective. The West has always claimed to be a democracy, and China to be an ‘authoritarian’ system. Yet, it is China leading the process of democratising technology.
Comments