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How Chinese startup DeepSeek is reshaping global artificial intelligence (AI) spending by challenging U.S.-led chip control has thrown a wrench into China’s tech sector. The innovation prowess of the company, with its low-cost AI models, highlights the growing pressure on China to break free from Western dominance in advanced semiconductor supply.
DeepSeek’s R1 model exemplifies this shift, offering AI capabilities rivaling those of global giants like OpenAI and Meta Platforms (META.O), yet at a fraction of the cost. This has shaken investors’ confidence in U.S.-based chip companies, with Nvidia (NVDA.O) losing nearly $600 billion in market value as a direct result. The U.S. government’s sanctions on China’s AI progress have come under scrutiny from investors and tech leaders alike.
President Trump’s new administration is now poised to respond to DeepSeek’s breakthrough by questioning the efficacy of U.S.-led chip export controls, which have stifled innovation in China. As Chinese companies like Huawei and Alibaba continue to innovate around advanced semiconductors, the fight for global AI dominance remains heating up. DeepSeek’s success underscores the critical role of access to high-end processors—and the bold decisions needed to break the U.S.-China tech deadlock.
The stakes are high as Beijing seeks to leverage its resources to build domestic semiconductor capabilities, mirroring companies like Huawei and Semiconductor Manufacturing International (0981.HK), which have already achieved significant milestones in replicating global advancements. The race between China and the West for AI dominance is becoming more competitive—and less about money and more about innovation.
Source: https://www.reuters.com/breakingviews/deepseek-offers-no-new-answers-chinas-ai-bind-2025-01-28