The release of DeepSeek R1 — an open-source artificial intelligence large-language model — has caught the world by surprise and shattered long-held assumptions about AI development.
According to venture capitalist Nic Carter, the release of the AI model, which was developed in China, dispelled notions that the country would only produce closed-source AI, and has eroded Silicon Valley’s perceived advantages over global competitors.
Carter added that DeepSeek is evidence that OpenAI does not have an unbeatable moat and that assumptions about scaling, value accrual in AI models, and development costs were also dispelled by the development.
China’s rapid deployment of the AI model contradicts previous reports that the country was six months behind the United States in AI development and creates further competition in the global AI arms race.
DeepSeek performance benchmarks. Source: DeepSeek
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China catches up despite restrictions
The United States imposed an AI chip embargo on China in October 2022 — preventing the export of select high-performance computing chips developed by US companies Nvidia and AMD.
Despite the ban, Chinese firms turned to domestic manufacturing or used cloud-computing platforms such as Amazon Cloud Services to sidestep the restrictions and access these high-performance chips.
China also relaxed its AI development regulations in August 2023 to encourage innovation, which included scrapping financial penalties for AI firms that deviate from the industry regulations.
The AI global arms race is underway
President Donald Trump has vowed to make the United States the AI capital of the world and sees both crypto and AI as central to continued US hegemony.
Speaking at the World Economic Forum’s Davos summit, the president said that deregulating the energy sector would fuel US ambitions to dominate the AI industry.
President Trump delivers his speech at the World Economic Forum’s Davos summit. Source: The White House
On Jan. 22, President Trump announced the $500 billion “Stargate” AI infrastructure initiative, including investments from OpenAI, tech company Oracle and SoftBank.
The goal of the project is to build AI and high-performance computing data centers in the United States, which the president claimed would create 100,000 jobs.
United Kingdom Prime Minister Keir Starmer announced similar plans to develop AI infrastructure in the country in January, including fast-tracking the development of data centers to remain competitive on the global stage.
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