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HomeInnovationChina's DeepSeek: A Game Changer in AI that Could Impact Your Investments

China’s DeepSeek: A Game Changer in AI that Could Impact Your Investments

 

China’s DeepSeek Might Shift the AI Power Balance. And Impact Your Retirement Savings. | Opinion


The Trump administration needs to take action to uphold U.S. dominance in artificial intelligence for both geopolitical and economic reasons.

A recent development from a Chinese company in artificial intelligence has created a major stir within the U.S. AI sector this week.

 

In recent years, American firms like OpenAI, Google, Meta, and Anthropic have been the frontrunners in advanced AI technologies. Microsoft, Amazon, and Nvidia have also taken the lead in cloud computing and specialized AI hardware. Competing in this arena typically requires billions of dollars in funding.

However, DeepSeek, the AI branch of a Chinese hedge fund and a comparably modest firm, has launched new language and reasoning AI models that perform on par with the top models from the U.S.

Feasibility of DeepSeek’s AI Advancement

The company asserts that it did not utilize high-end artificial intelligence chips (GPUs) and claims the cost of their computing was only $5.6 million, which is a small fraction of the hundreds of millions reportedly spent by OpenAI and other leading U.S. firms.

 

Reactions from experts and industry veterans have ranged from doubt to surprise. Based on the information in DeepSeek’s technical documents, this advancement appears, at first glance, to be credible.

 

Releasing such an advanced AI model under a permissive open-source license (essentially for free) disrupts the pricing models of commercial AI companies, which need to recover significant initial expenses.

 

It could also negatively impact many Americans’ retirement savings plans.

For the Chinese government, DeepSeek is akin to a modern-day David standing up to Big Tech’s Goliath: local teams educated at prestigious Chinese universities are innovating against the odds, significantly cutting costs, releasing the latest AI models for public use, and documenting their methods for wider application.

 

We shouldn’t be surprised if open-source AI is presented as a digital manifestation of the Belt and Road Initiative, serving as a means of Chinese soft power: offering affordable AI solutions globally, particularly for developing nations.

 

U.S. Companies Remain Pioneers in AI Progress

It’s important to note that this development does not undermine the U.S. position as the leading country in artificial intelligence; however, it does close the gap between the U.S. and China. This necessitates an urgent reevaluation of AI policies by the federal government. Furthermore, it raises significant concerns for U.S. AI firms regarding their competitive advantages and the financial dynamics of commercial AI, compelling them to rethink their strategies and investments.

 

These issues are crucial not only for policymakers, tech leaders, and venture capitalists but also for average Americans whose retirement accounts could suffer if U.S. AI dominance is not preserved.

Consider that around 62% of adult Americans (including 80% of those aged 55 and older) have stock investments.

The S&P 500 saw a 23% return last year. Without the contributions from the “Magnificent Seven” tech giants (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – all key players in AI), those numbers would have been much lower.

 

It’s no surprise that the initial global market reaction to DeepSeek has been harsh.

To address this disruption, there are several initiatives that U.S. government and business leaders can consider. The federal government, along with private equity, venture capital, and other investors, is currently funneling billions into AI projects.

Last week, the Trump administration convened OpenAI, Oracle, and Softbank to announce a preliminary $100 billion investment in AI computing centers, nicknamed Stargate. However, these investment strategies may need adjustments.

Despite these significant efforts, much of the policymaking has been left up to the courts. High-stakes legal battles are winding through the judicial system. Before these cases conclude, the federal government should clarify regulations.

 

The U.S. must also avoid eliminating open-source AI. Should this occur, it risks losing ground to China and other nations. It’s important to remember that open-source opportunities allow U.S. AI companies to benefit from DeepSeek’s advancements as well.

Next, there is the question of whether U.S. export controls are effective. For example, Nvidia is selling H800 chips, which are slower than the H100 chips that Washington has blocked from being exported to China.

 

The U.S. government should evaluate if another set of export controls on cutting-edge semiconductor chips would be beneficial. Better enforcement to prevent GPU smuggling may also be necessary—ironically, AI could aid in this process.

Generative AI, while crucial, is merely one facet of the broader AI solutions landscape. The focus on generative AI is overshadowing other areas of investment like biomechanics and robotics. By utilizing U.S. research institutions and academic centers, these fields can be prioritized and expanded.

 

A strategic approach to talent, which may include addressing immigration challenges, must also be seriously contemplated. David Sacks, the new AI czar, and the Trump administration should consider setting an interim plan while developing a comprehensive longer-term strategy mandated by an executive order last week.

Maintaining the U.S. leadership position in artificial intelligence is imperative not just because of its transformative potential and geopolitical significance but also because it directly affects the health of the U.S. AI sector and the financial stability of millions of Americans.

Kashyap Kompella is founder of RPA2AI Research, an AI analyst firm. James Cooper is a law professor at California Western School of Law in San Diego. Their recent book is “A Short and Happy Guide to Artificial Intelligence for Lawyers,” and their next book with West Academic Publishing will address AI governance and regulation.