Former U.S. President Donald Trump warned on Monday about the risks posed by a low-cost artificial intelligence application developed by the Chinese company “DeepSeek,” describing it as a “wake-up call” for American tech firms in Silicon Valley. Meanwhile, investors in the technology sector appeared shocked by its potential impact.
Although the launch of DeepSeek’s latest AI model—similar to ChatGPT—initially went unnoticed due to its coincidence with Trump’s inauguration, it soon triggered a significant drop in the stock prices of major global tech companies.
Over the weekend, the Chinese AI chatbot gained massive traction, becoming the most downloaded free application on Apple’s App Store in the U.S., surpassing OpenAI’s ChatGPT.
A Major Economic and Technological Challenge for U.S. Firms
The announcement that DeepSeek developed its latest model, “R1,” at a fraction of the cost incurred by major tech firms—particularly in acquiring Nvidia’s AI chips—came as a major surprise, unsettling the technology sector.
This development is particularly significant given that the AI boom—accelerated by the launch of ChatGPT in late 2022—has made Nvidia one of the world’s most valuable companies.
With these rapid advancements, a critical question arises: Should major U.S. tech firms continue investing hundreds of billions of dollars in AI development while a Chinese company appears capable of producing a comparable model at a significantly lower cost?
Political and Technological Implications
DeepSeek’s progress represents a blow to the United States, which has prioritized maintaining its technological supremacy. In response, Trump commented, “We hope this serves as a wake-up call, urging our industries to sharpen their focus on competition.”
He further suggested that this shock could be “positive” for major U.S. tech firms, as it might push them to reduce development costs while still achieving similar breakthroughs.
Similarly, OpenAI’s CEO, Sam Altman, acknowledged the emergence of a new competitor as a “motivating factor.” He praised “R1” for its impressive performance relative to its low cost and vowed to accelerate OpenAI’s release of new AI models.
The U.S.-China Tech Race Intensifies
These developments unfold against the backdrop of ongoing U.S. efforts to ban the Chinese-owned app TikTok or force its sale. Trump mentioned that Microsoft is already in negotiations to acquire it.
Meanwhile, tech investor and Trump ally Marc Andreessen likened the launch of “R1” to a “Sputnik moment,” referring to the Soviet Union’s historic launch of the first artificial satellite in 1957, which stunned the West.
Microsoft CEO Satya Nadella recently warned at the World Economic Forum in Davos that “we must take Chinese technological advancements very seriously.” In response, Microsoft is planning to invest $80 billion in AI development this year, while Meta has announced investments of at least $60 billion.
Did DeepSeek Bypass U.S. Sanctions?
Following these events, Nvidia’s stock dropped sharply by 17%, raising concerns about the future of U.S. tech dominance.
Despite Washington’s restrictions on exporting Nvidia’s advanced AI chips to China, there are suspicions that DeepSeek may have secretly gained access to the restricted “H100” chips. This claim was echoed by Tesla and SpaceX owner Elon Musk, who has heavily invested in AI through his company xAI.
With these unfolding developments, the question remains: Is the world witnessing a major shift in the balance of power in the AI race between the U.S. and China?
