China Smart, US Dumb: The Deepseek Foray into Destabilization of AI Investment
February 6, 2025
Yep, a dinobaby wrote this blog post. Replace me with a subscription service or a contract worker from Fiverr. See if I care.
I have published a few blog posts about the Chinese information warfare directed at the US. Examples have included videos of a farm girl with primitive tools repairing complex machinery, the carpeting of ArXiv with papers about Deepseek’s AI innovations, and the stories in the South China Morning Post about assorted US technology issues.
Thanks You.com. Pretty good illustration.
Now the Deepseek foray is delivering fungible results. Numerous articles appeared on January 27, 2025, pegged to the impact of the Deepseek smart software on the US AI sector. A representative article is “China’s Deepseek Sparks AI Market Rout.”
The trusted real news outfit said:
Technology shares around the world slid on Monday as a surge in popularity of a Chinese discount artificial intelligence model shook investors’ faith in the AI sector’s voracious demand for high-tech chips. Startup Deepseek has rolled out a free assistant it says uses lower-cost chips and less data, seemingly challenging a widespread bet in financial markets that AI will drive demand along a supply chain from chipmakers to data centres.
Facebook ripped a page from the Google leadership team’s playbook. According to “Meta Scrambles After Chinese AI Equals Its Own, Upending Silicon Valley,” the Zuckerberg outfit assembled four “war rooms” to figure out how a Chinese open source AI could become such a big problem from out of the blue.
I find it difficult to believe that big US outfits were unaware of China’s interest in smart software. Furthermore, the Deepseek team made quite clear by listing dozens upon dozens of AI experts who contributed to the Deepseek effort. But who in US AI land has time to cross correlate the names of the researchers in the ArXiv essays to ask, “What are these folks doing to output cheaper AI models?”
Several observations are warranted:
- The effect of this foray has been to cause an immediate and direct concern about US AI firms’ ability to reduce costs. China allegedly has rolled out a good model at a lower price. Price competition comes in many forms. In this case, China can use less modern components to produce more modern AI. If you want to see how this works for basic equipment navigate to “Genius Girl Builds Amazing Hydroelectric Power Station For An Elderly Living Alone in the Mountains.” Deepseek is this information warfare tactic in the smart software space.
- The mechanism for the foray was open source. I have heard many times from some very smart people that open source is the future. Maybe that’s true. We now have an example of open source creating a credibility problem for established US big technology outfits who use open source to publicize how smart and good they are, prove they can do great work, and appear to be “community” minded. Deepseek just posted software that showed a small venture firm was able to do what US big technology has done at a fraction of the cost. Chinese business understands price and cost centric methods. This is the cost angle driven through the heart of scaling up solutions. Like giant US trucks, the approach is expensive and at some point will collapses of its own bloated framework.
- The foray has been broken into four parts: [a] The arXiv thrust, [b] the free and open source software thrust which begs the question, “What’s next from this venture firm?”, [c] the social media play with posts ballooning on BlueSky, Telegram, and Twitter, [d] the real journalism outfits like Bloomberg and Reuters yapping about AI innovation. The four-part thrust is effective.
China’s made the US approach to smart software look incredibly stupid. I don’t believe that a small group of hard workers at a venture firm cooked up the Deepseek method. The number of authors on the arXiv Deepseek papers make that clear.
With one deft, non kinetic, non militaristic foray, China has amplified doubt about US AI methods. The action has chopped big bucks from outfits like Nvidia. Plus China has combined its playbook for lower costs and better prices with information warfare. I am not sure that Silicon Valley type outfits have a response to roll out quickly. The foray has returned useful intelligence to China.
Net net: More AI will be coming to destabilize the Silicon Valley way.
Stephen E Arnold, February 6, 2025
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