DeepSeek shows AI's centre of power could shift away from US
2025-01-28
Category: news

DeepSeek's arrival at the top of the Apple App Store charts has placed it firmly in the public consciousness, shaking the belief that the US would continue as the largely unchallenged global superpower of AI.This dominance has been mainly down to enormous capital investment - but China's DeepSeek was developed for a fraction of the price of its US rivals. Its sudden debut has had a huge impact, wiping $1tn off the value of US tech stocks.The efficiency and capability of DeepSeek's model should not be underestimated. All of this has been achieved using lower-end technology, a consequence of US restrictions on the export to China of high-tech components - Nvidia's H100 chip at the higher end and its H800 chip at the lower end, both of which are commonly used in AI.
What exactly is DeepSeek and why is everyone talking about it?
The US barred its export over fears that China could challenge American AI dominance if given unfettered access to Silicon Valley technology, so a viable AI model created in this environment speaks for itself in terms of ingenuity and potential.Despite this, it is what DeepSeek represents, rather than what it has produced, that may ultimately be its lasting legacy.It highlights a new way of thinking about the economics of the AI industry. It levels the playing field for governments and companies with aspirations to become AI power players. And it demonstrates that innovation born of necessity can produce results with the power to make the money markets rethink the economic direction of travel.Many already felt the US AI industry was rife with inflated valuations, leading to talk of an AI bubble. That bubble hasn't quite burst, but its structural integrity is certainly now under strain.Some may interpret DeepSeek's impact as a sign that the seat of AI power is shifting eastward - but it's also possible that innovators worldwide will now take inspiration and attempt to develop their own lower-cost AI technologies.The investment plans announced in the US - worth hundreds of billions of dollars - were simply not replicable elsewhere, but that may no longer be such a problem.
DeepSeek vs ChatGPT - how do they compare?Watch: Marc Cieslak explains why DeepSeek has caused shockwaves
The UK government has made clear its intention to use AI as an economic driver. If lower development costs become the norm, this ambition may become more attainable.The UK has never lacked innovators, but British businesses have often struggled to scale without significant overseas investment. A cheaper, more resourceful approach to AI could help the UK and other governments realise the goal of cultivating homegrown AI powerhouses.The US tech giants, however, are unlikely to take this lying down. They may have been given a bloody nose by the markets, but they still have enormous technical and financial resources at their disposal.These companies are already exploring new ways of monetising their AI technologies and finding applications for AI across public life.However, they may now face a tightening of belts and lowering of valuation expectations as a new economic reality kicks in.