DeepSeek AI, a relatively new player in artificial intelligence, has made notable progress in the field. Backed by High-Flyer, a Chinese quantitative hedge fund, the company introduced its open-source large language model, DeepSeek-V3, in late December 2024.
Now, the Chinese AI lab has released another large language model, DeepSeek-R1, which employs a mixture-of-experts architecture. The model reportedly performs on par with OpenAI in areas such as mathematics, coding and general knowledge, while also being more cost-efficient.
DeepSeek-R1’s development reflects China’s growing ability to advance AI despite constraints. Limited access to cutting-edge AI chips due to United States export restrictions has pushed Chinese firms to find ways to optimize second-tier hardware.
DeepSeek’s V3 model, for instance, was trained at a reported cost of US$5.6 million – significantly less than the estimated US$78 million for OpenAI’s GPT-4. The combination of cost efficiency and open-source availability makes DeepSeek’s models accessible for global developers, potentially broadening their adoption.
China’s strategic AI landscape
DeepSeek’s success is a microcosm of China’s broader ambitions in AI. The ‘Beijing Artificial Intelligence Industry White Paper 2024’ underscores a robust and expanding ecosystem. With over 2,400 AI enterprises and 46 publicly listed companies valued at US$592 billion, Beijing leads in both innovation and market capitalization.
In 2024 alone, private investment in generative AI quintupled to US$3.15 billion, driven by government backing and a focus on industry-specific applications. China’s four strategic AI advantages have become increasingly apparent:
Government-backed AI Innovation: Centralized planning and resource allocation ensure long-term focus and sustained funding for AI development.
Ecosystem play: Giants like Alibaba, Huawei and Baidu provide platforms that enable smaller companies to innovate and grow.
AI in the physical world: Integration of AI with hardware creates real-world applications, from autonomous vehicles to smart manufacturing.
Vertical focus: Prioritizing industry-specific AI solutions allows for targeted advancements, particularly in sectors like healthcare and logistics.
China’s competitive edge is further bolstered by the emergence of startups such as Zhipu AI, MiniMax and Baichuan AI. These companies, supported by substantial investments from tech giants and venture capital, are driving breakthroughs that rival their Western counterparts.
The American response: The Stargate initiative
The rise of DeepSeek and China’s AI dominance have not gone unnoticed. In a high-profile announcement at the White House, OpenAI CEO Sam Altman, SoftBank CEO Masayoshi Son and Oracle Chairman Larry Ellison unveiled Stargate, a US$100 billion initiative to fortify America’s AI infrastructure.
Backed by President Donald Trump, Stargate aims to build data centers and other critical infrastructure to maintain American leadership in AI. Altman has long advocated for government support in AI infrastructure, arguing that investments are crucial to staying ahead of China.
Recent advancements in AI highlight a shifting geopolitical landscape.
Stargate’s first project, a 92,900-square-meter data center in Texas, symbolizes this ambition. The initiative’s ultimate goal is to create a foundational strategy that ensures AI development benefits the broader economy while safeguarding national security.
However, United States policy on AI remains fragmented. While the Trump administration has repealed some regulatory measures to spur innovation, it has retained provisions addressing the energy demands of advanced AI data centers. These mixed signals complicate efforts to create a cohesive strategy.
Implications for global AI development
Recent advancements in AI highlight a shifting geopolitical landscape with several key implications:
Innovation under constraints – The ability to develop competitive AI models despite hardware limitations suggests that ingenuity and optimization can offset resource scarcity. This is particularly relevant for emerging markets with restricted access to advanced technology.
Open-source disruption – The growing adoption of open-source AI models challenges the dominance of proprietary systems, fostering a more decentralized and collaborative AI ecosystem.
Strategic rivalry – The United States-China AI race extends beyond technological advancement to influence global standards, economic power and national security considerations. Initiatives such as Stargate reflect the increasing strategic significance of AI.
Shift in focus – While Western AI development has traditionally prioritized general-purpose models, a growing emphasis on industry-specific applications in other regions may lead to faster real-world impact, potentially reshaping global priorities.
Rapid transformation
DeepSeek’s rise and the subsequent American response illustrate the dynamic and competitive nature of AI development. As China and the United States vie for dominance, the global AI landscape is poised for rapid transformation. Collaboration and innovation will be key to navigating this new era, ensuring that AI’s potential benefits humanity as a whole.
