The AI app, DeepSeek, from the Chinese start-up, has not only deflated the ego of the US technology elite but also the financial bubble fueled by the AI hype on Western stock markets. Even in the US, the Chinese AI app has outperformed its US competitors since its market debut, with DeepSeek topping the download charts of iPhones, while US tech stocks plummeted.
Especially big tech companies like Nvidia, which manufacture the “super-duper” chips for US AI companies, lost over $600 billion in market value overnight. This is because the DeepSeek app does not require these “super-duper” Nvidia chips to produce a better and more affordable product, according to the unanimous verdict of Western AI experts.
The Biden administration’s intention to curb China’s technological rise by banning the export of Nvidia chips to China, a policy maintained by the new Trump administration, has been rendered ineffective. DeepSeek’s development indicates that Chinese AI engineers have found ways to bypass these restrictions, focusing on greater efficiency with reduced resource consumption.
Thanks to the Chinese spirit of innovation, which was not deterred by US sanctions, the US AI technology is now outdated and no longer internationally competitive. The only way Trump could now rescue the US AI industry would be to impose high tariffs on Chinese competitive products, which would, however, lead to US products, only sold domestically, falling further behind in technology over time.
Another characteristic that makes the Chinese AI app unbeatable is its open-source software, whereas American products like OpenAI (ChatGPT) or Meta’s models are closed-source. “Open Source” means the code is accessible to anyone and not patented. Open-source AI models like DeepSeek offer a more democratic and transparent approach, as users can see what the app does with their data, preventing misuse. “Open Source” is also more cost-effective and innovative, as anyone can improve or develop the app for specific uses, without the profit motive of licensing fees.
In contrast, AI apps based on closed-source software are patented ownership models, where users can only see the output, not the inner workings of the system and are limited by the pre-programmed algorithms and priorities. The closed-source model is essential for making a profit, but it also leads to higher costs and a weaker motivation for innovation, whereas open-source models drive faster technological progress, greater accessibility and community-driven improvements, making AI more inclusive and beneficial for a broader social user base.
The success of DeepSeek has far-reaching implications for the global technology industry and supply chains, as it challenges the widespread assumption that the future of AI will always require more capital, energy and resources for development.
The reaction of many Americans to this Chinese breakthrough was quick, but not by acknowledging that they had been resting on their technological laurels for too long and are now falling behind; instead, they tried to defame and sabotage the Chinese competitors.
The “values of free trade, fairness and may the best win” often praised by Washington are only lip-service to hide the anxiety about the already accomplished loss of US technological leadership.