A recent report reveals that Chinese startup DeepSeek’s AI Assistant has overtaken OpenAI’s ChatGPT. As of this writing (January 27), it’s now the top-rated free app on Apple’s U.S. App Store. 

The most intriguing part of this news update is how DeepSeek surged past other AI models like Gemini and ChatGPT within just 17 days after launch. According to experts, this feat highlights the rising global competition in AI and also challenges long-standing beliefs about U.S. dominance in technology.

Central to DeepSeek’s achievement is its V3 model, which was described by its creators as an outperforming open-source alternative. The developer boasts that it has the capabilities to compete with top closed-source models globally, which has drawn significant attention from Silicon Valley.

As expected, the issue has sparked debates on U.S. chip export controls, crucial for AI model training. The Biden administration since 2021 has expanded restrictions to prevent high-performance chips from being exported to China, aiming to curb the country’s AI advancements. 

However, DeepSeek researchers revealed in a recent paper that their model was trained using Nvidia’s H800 chips, spending less than $6 million. While the specifics of the chip usage have been disputed, the relatively low cost and reliance on less advanced hardware have raised questions about the impact of U.S. export policies.

Venture capitalist Nic Carter noted that DeepSeek’s success dispels the notion that China can only produce closed-source AI models. It also undermines Silicon Valley’s perceived advantages and challenges assumptions about the scalability, cost, and value of AI development.

Why was China able to record rapid progress in AI despite significant hurdles, including U.S. restrictions on high-performance chips? 

The answer lies in the ability of Chinese firms to leverage domestic manufacturing and cloud computing platforms such as Amazon Web Services to access the necessary technology. Additionally, China relaxed its AI development regulations in August 2023, removing financial penalties for firms that deviate from industry norms, further fueling innovation.

Looking at the cascading effect of China’s rise in the AI sector, we could be witnessing the beginning of a global AI arms race. The U.S. is poised to challenge DeepSeek’s advancements, as former President Donald Trump stressed the importance of AI and cryptocurrency for maintaining American dominance. 

At the World Economic Forum’s Davos summit, Trump outlined plans to deregulate the energy sector to boost AI development. On January 22, he unveiled the $500 billion “Stargate” initiative, a partnership with OpenAI, Oracle, and SoftBank to build AI and high-performance computing data centers in the U.S. The project is expected to create 100,000 jobs.

Similarly, U.K. Prime Minister Keir Starmer unveiled plans in January to fast-track AI infrastructure development, including data centers, to ensure the country remains competitive globally. These efforts reflect the growing recognition of AI as a critical driver of economic and geopolitical power.

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