DeepSeek: The Chinese AI Startup Shaking Up Wall Street

A frenzy surrounding DeepSeek, a Chinese AI startup, has recently disrupted Wall Street, sparking debates about economic and geopolitical competition between the United States and China in the realm of artificial intelligence (AI) development. This article delves into what DeepSeek is, why it's causing a stir, and the broader implications for the future of AI.

What is DeepSeek?

Founded in 2023 and based in Hangzhou, China, DeepSeek quickly launched its first large-scale AI language model that same year. The CEO, Liang Wenfeng, previously co-founded High-Flyer, a prominent Chinese investment fund focusing on AI-driven quantitative trading. DeepSeek gained industry recognition last month when its new AI model claimed parity with those by US companies like OpenAI (creator of ChatGPT) while also being more cost-effective in its reliance on expensive Nvidia chips for training the system. DeepSeek's AI assistant has rapidly become the most downloaded free application in the Apple iPhone store.

Why the Hype Around DeepSeek?

Several reasons contribute to the surge of interest and anxiety surrounding DeepSeek:

• Economic Competition: The success of DeepSeek raises questions about the competitiveness of the United States in AI. If a Chinese startup can achieve similar results at a lower cost, it challenges the massive investments that US tech companies are making in data centers and computing chips.
• Technological Advancement: DeepSeek's recent research paper on its R1 AI model showcased advanced "reasoning" capabilities, such as rethinking approaches to mathematical problems. The capabilities of the R1 AI model, combined with potentially lower costs, have truly shaken up those in the financial world.
• "Sputnik Moment" for AI?: Some see DeepSeek's rise as a "Sputnik moment" for AI, a wake-up call for the US to accelerate its efforts in AI research and development. This analogy refers to the Soviet Union's launch of Sputnik in 1957, which spurred the US into action and accelerated the space race.

The Debate Within the United States

Within the United States, DeepSeek has ignited conversations about how to compete better with China in artificial intelligence. Venture capitalist Marc Andreessen, who advises former President Donald Trump on technology policy, argues that over-regulation of the AI industry by the US government could hinder American companies and allow China to take the lead.

Geopolitical Implications and Export Controls

The attention surrounding DeepSeek also highlights the ongoing debate about US export controls on AI semiconductors sold to China. Gregory Allen, Director of the Wadhwani Center for AI and Advanced Technologies at the Center for Strategic and International Studies, suggests that DeepSeek's announcement could be politically timed to demonstrate the ineffectiveness or counterproductive nature of these export controls. Shortly after assuming office, former President Trump signed an order that the administration would identify and eliminate existing export control loopholes, further underscoring the focus on this aspect of AI development competition.

Key Takeaways:

• DeepSeek's rapid rise is fueling discussions on AI competition between the US and China, and the need for strategic investments to maintain US competitiveness in AI.
• The debate within the US centers on how best to compete with China in AI—whether through deregulation to unleash innovation or carefully targeted export controls to limit China's access to advanced AI technology.
• DeepSeek's innovations may pressure US tech companies to accelerate their rate of innovation to maintain a competitive edge. Overall, DeepSeek's emergence underscores the increasingly global nature of AI development.