Did the U.S. just learn there is an AI gap with China? Or is it just hype? The communist power just rattled the U.S. stock market as its upstart artificial intelligence (AI) company DeepSeek suddenly appears to have launched low-cost, open-source ChatGPT-like AI model called R1, which has the same abilities, but at a fraction of the cost of OpenAI’s, Google’s or Meta’s popular AI models.
This surprise slashed the stock prices for major U.S. tech firms at the head of the AI boom, like Nvidia.
Nvidia’s microchips power the world’s most advanced AI systems, but other U.S. chipmakers also lost value sharply. As did many other major companies that are highly invested in AI, such as Microsoft, Meta and Tesla, as well as the rest of the so-called “Magnificent Seven” stocks—Apple, Google parent Alphabet and Amazon.
Overall U.S. tech stocks took a roughly $1 trillion hit, triggering hysteria from Wall Street to Silicon Valley.
Tech investor, and Trump supporter, Marc Andreessen called the Chinese AI model’s launch “one of the most amazing and impressive breakthroughs I’ve ever seen,” claiming it was “AI’s Sputnik moment,” a reference to the first satellite launched by the Soviet Union in 1957.
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. 🤖🫡
— Marc Andreessen 🇺🇸 (@pmarca) January 24, 2025
At the time, the U.S. was caught off-guard by its communist rival’s technological achievement.
DeepSeek’s emergence comes as the U.S. restricts sales of advanced chip technology to China, citing national security concerns related to AI.
The New York Post reported:
DeepSeek claims to have developed the advanced model in just two months at a cost of under $6 million — and without access to Nvidia’s best computer chips. That’s a stark contrast to the billions of dollars typically spent by Western tech giants on AI research and chips.
And this shock development could be a game changer, especially in the national security and space arenas.
The Post added: “It cast doubt over the thesis behind the industry’s entire supply chain and whether America actually has an advantage over its chief geopolitical rival.”
“The DeepSeek announcement from China was nothing short of a financial Scud missile aimed at a U.S. market that is much more fragile than most will admit,” said Islanda Capital Investments CEO Anthony Esposito, who noted that AI hype has driven markets to all-time highs.
As reported by CNBC, the DeepSeek app has already surpassed ChatGPT as the top free app in Apple’s App Store.
The shock was even more pronounced coming just after President Donald Trump signed an executive order aimed at “removing barriers” to the development of artificial intelligence.
Trump also announced a $500 billion AI infrastructure initiative known as Stargate, which includes the participation of top tech firms such as OpenAI, Oracle and SoftBank, and is set to create an unprecedented buildout of data centers and computer chips necessary to power advanced AI.
Trump called it “the largest AI infrastructure project by far in history” that would help keep “the future of technology” in the U.S.
But the launch of DeepSeek is raising questions about the future of America’s AI dominance and the scale of investments US firms are planning.
The BBC reported:
“This idea of a low-cost Chinese version hasn’t necessarily been forefront, so it’s taken the market a little bit by surprise,” said Fiona Cincotta, senior market analyst at City Index.
“So, if you suddenly get this low-cost AI model, then that’s going to raise concerns over the profits of rivals, particularly given the amount that they’ve already invested in more expensive AI infrastructure.”
Of course, not everyone believes the hype about DeepSeek, from doubts about the chips it uses to the minimal investment it claims led to its launch.
— Bring Me!! (@BringMeCoins) January 27, 2025
The tech company was founded in 2023 by Liang Wenfeng in Hangzhou, a city in southeastern China. He reportedly built up a store of Nvidia A100 chips, now banned from export to China.
According to BBC: “Experts believe this collection—which some estimates put at 50,000—led him to launch DeepSeek, by pairing these chips with cheaper, lower-end ones that are still available to import.”
Meanwhile, the industry is taking the company at its word that the cost was so low, so the market panic hinges on the truthfulness of a single, relatively unknown company.
CNN notes:
…the cost-saving achievement may be significant, the R1 model is a ChatGPT competitor—a consumer-focused large-language model. It hasn’t yet proven it can handle some of the massively ambitious AI capabilities for industries that—for now—still require tremendous infrastructure investments.
Meanwhile, widespread use of the Chinese chatbot should be accompanied by concern and caution about the information it provides, as it appears to be censored.
Calcalistech reported: “An investigation conducted by attorney Or Cohen, an associate at the cyber, privacy and copyright group at the Pearl Cohen law firm, revealed that when DeepSeek is asked questions about sensitive political issues related to China, it refuses to provide answers or provides answers that recite the official position of the Communist Party.”
The outlet added:
“Along with the admiration for DeepSeek’s performance, a simple search indicates the limitations on freedom of expression that are embedded in technology from China,” Cohen told Calcalist. “This is a warning sign to any Western organization, against hasty assimilation of the technology without sufficient testing.”
X user @BringMeCoins noted in the post above:
The biggest market for AI isn’t individuals; it’s enterprises. And no major U.S. company will risk their data falling into the hands of a foreign government. This effectively shuts DeepSeek out of the American corporate AI market—which is where the real money is.
“Time will tell if the DeepSeek threat is real—the race is on as to what technology works and how the big Western players will respond and evolve,” Michael Block, market strategist at Third Seven Capital, was quoted as saying in CNN.
I would say this may be a very good thing as American tech firms could use a kick in the pants to make this technology faster, better and cheaper to keep us ahead of our communist Chinese enemy.
The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.
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Our response to Sputnik was NASA, which eventually took Americans to the moon, with fantastic tech repercussions. What will be our response to this?
Well Paul Crespo. Here is something for you. Ask GROK about Deepseek the X AI.
GROK Will respond in a complicated High Tech vernacular at the engineering level
However GROK can reply at the readers digest Grade 6 comprehension level or any other comprehension level
I wanted the grade 6 readers digest level. I went to GROK and asked “What is Deepseek and tell me like I am 12 years ol” – then prepare to be amazed in sub-second time.
Is this real, or is it Chinese fake news?
Can the US counter