The progress of artificial intelligence remains a major story in the early going of the second Trump presidency. Last week, Trump announced a new project called Stargate, which involved OpenAI, Oracle, and Softbank announcing at a White House event that they would invest $100 million — and perhaps as much as $500 million over time—in AI infrastructure.
Soon after, Trump ally Elon Musk ripped the project publicly, arguing on X that “they don’t actually have the money.” The post, the sort of thing not usually seen from presidential advisers, was said to have angered Trump’s White House staff.
Now, there has been another significant AI development, one that threatens the best-laid AI plans for America’s tech companies.
Enter DeepSeek
DeepSeek is a Chinese artificial intelligence startup, and this week, its chatbot, R1, arrived in U.S. app stores. Not long after the kerfuffle over the TikTok ban, another Chinese app had landed at the top of Apple and Google’s app stores.
“DeepSeek-R1 is now live and open source, rivaling OpenAI’s Model o1. Available on web, app, and API,” the company’s website said.
How is DeepSeek different from its American rivals?
“Part of what’s worrying some U.S. tech industry observers is the idea that the Chinese startup has caught up with the American companies at the forefront of generative AI at a fraction of the cost,” an Associated Press story said Monday. “That, if true, calls into question the huge amounts of money U.S. tech companies say they plan to spend on the data centers and computer chips needed to power further AI advancements.”
The software is open-source and reportedly much cheaper than its American rivals.
A Deep Selloff
The arrival of R1 was enough to send tech stocks tumbling on Monday. Per Reuters, Nvidia, the leading company in AI chips, dropped 17 percent on Monday; its one-day loss of $593 billion in market cap was the largest single-day loss in history. Nvidia had gained some of that value back in early trading on Tuesday.
Why the big selloff? DeepSeek claims that, per a New York Times analysis, it used “a modest number of second-rate A.I. chips to match the performance of leading American A.I. models at a fraction of the cost…. by using clever engineering to substitute for raw computing horsepower.”
Furthermore, before DeepSeek’s arrival, it was not believed that China was anywhere close to challenging Silicon Valley’s lead when it comes to AI technology.
“The ideal case for AI would be something like ‘everyone has a magic lamp in their pocket with a genie that can grant unlimited wishes; the lamp is cheap and each wish is free,’ Matt Levine wrote in his Money Stuff column for Bloomberg News. “That case would be extremely good for human flourishing (maybe?[1]), but terrible for stock market valuations. What do you need Nvidia chips for, if the genie is free? What do you need your 401(k) for, if the genie is free? Sort of a good news, bad news situation.”
A “Sputnik moment”
The arrival of DeepSeek adds another layer to the discourse about artificial intelligence: A New Cold War development. Many have used the phrase “a Sputnik moment” to describe DeepSeek’s arrival, the key moment in the space race when the Soviet Union launched the first artificial space satellite in 1957. On top of all the worries about what AI could bring in the coming years, it’s now latched on to questions related to geopolitics.
iPhone 13. Image Credit: Creative Commons.
All of these questions are likely very far from any answers in terms of how they will shake out. But they certainly have American tech companies spooked.
About the Author: Stephen Silver
Stephen Silver is an award-winning journalist, essayist and film critic, and contributor to the Philadelphia Inquirer, the Jewish Telegraphic Agency, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. For over a decade, Stephen has authored thousands of articles that focus on politics, technology, and the economy. Follow him on X (formerly Twitter) at @StephenSilver, and subscribe to his Substack newsletter
