We are within the early days of a seismic shift in the worldwide AI industry. DeepSeek, a previously little-known Chinese artificial intelligence company, has produced a “game changing”“ large language model that guarantees to reshape the AI landscape almost overnight.
But DeepSeek’s breakthrough also has wider implications for the technological arms race between the US and China, having apparently caught even the best-known US tech firms off guard. Its launch has been predicted to begin a “slow unwinding of the AI bet” within the west, amid a brand new era of “AI efficiency wars”.
In fact, industry experts have been speculating for years about China’s rapid advancements in AI. While the supposedly free-market US has often prioritised proprietary models, China has built a thriving AI ecosystem by leveraging open-source technology, fostering collaboration between government-backed research institutions and major tech firms.
This strategy has enabled China to scale its AI innovation rapidly while the US – despite all of the tub-thumping from Silicon Valley – stays limited by restrictive corporate structures. Companies similar to Google and Meta, despite promoting open-source initiatives, still rely heavily on closed-source strategies that limit broader access and collaboration.
What makes DeepSeek particularly disruptive is its ability to realize cutting-edge performance while reducing computing costs – an area where US firms have struggled because of their dependence on training models that demand very expensive processing hardware.
Where once Silicon Valley was the epicentre of worldwide digital innovation, its corporate behemoths now appear vulnerable to more modern, “scrappy” startup competitors – albeit ones enabled by major state investment in AI infrastructure. By leveraging China’s industrial approach to AI, DeepSeek has crystallised a reality that many in Silicon Valley have long ignored: AI’s centre of power is shifting away from the US and the west.
It highlights the failure of US attempts to preserve its technological hegemony through tight export controls on cutting-edge AI chips to China. According to research fellow Dean Ball: “You can keep (computing resources) away from China, but you may’t export-control the ideas that everybody on the earth is looking for.”
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DeepSeek’s success has forced Silicon Valley and enormous western tech firms to “take stock”, realising that their once-unquestioned dominance is suddenly in danger. Even the US president, Donald Trump, has proclaimed that this ought to be a “wake-up call for our industries that we have to be laser-focused on competing”.
But this story will not be nearly technological prowess – it could mark a very important shift in global power. Former US secretary of state Mike Pompeo has framed DeepSeek’s emergence as a “shot across America’s bow”, urging US policymakers and tech executives to take immediate motion.
DeepSeek’s rapid rise underscores a growing realisation: globally, we’re entering a potentially latest AI paradigm, one where China’s model of open-source innovation and state-backed development is proving simpler than Silicon Valley’s corporate-driven approach.
I’ve spent much of my profession analysing the transformative role of AI on the worldwide digital landscape – examining how AI shapes governance, market structures and public discourse, and exploring its geopolitical and ethical dimensions, now and far in the longer term.
I even have personal connections with China, having lived there while teaching at Jiangsu University, then written my PhD thesis on the country’s state-led marketisation programme. Over the years, I even have studied China’s evolving tech landscape, observing firsthand how its unique mix of state-driven industrial policy and private-sector innovation has fuelled rapid AI development.
I imagine this moment may come to be seen as a turning point not only for AI, but for the geopolitical order. If China’s AI dominance continues, what could this mean for the longer term of digital governance, democracy, and the worldwide balance of power?
China’s open-source AI takeover
Even within the early days of China’s digital transformation, analysts predicted the country’s open-source focus could lead on to a serious AI breakthrough. In 2018, China was integrating open-source collaboration into its broader digitisation strategy, recognising that fostering shared development efforts could speed up its AI capabilities.
Unlike the US, where proprietary AI models dominated, China embraced open-source ecosystems to bypass western gatekeeping, scale innovation faster, and embed itself in global AI collaboration. China’s open-source activity surged dramatically in 2020, laying the muse for the sort of innovation seen today. By actively fostering an open-source culture, China ensured that a broad range of developers had access to AI tools, fairly than restricting them to a handful of dominant firms.
The trend has continued in recent times, with China even launching its own state-backed open-source operating systems and platforms in 2023, to further reduce its dependence on western technology. This move was widely seen as an effort to cement its AI leadership and create an independent, self-sustaining digital ecosystem.
While China has been steadily positioning itself as a leader in open-source AI, Silicon Valley firms remained focused on closed, proprietary models – allowing China to catch up fast. While firms like Google and Meta promoted open-source initiatives in name, they still locked key AI capabilities behind paywalls and restrictive licenses.
In contrast, China’s government-backed initiatives have treated open-source AI as a national resource, fairly than a company asset. This has resulted in China becoming one among the world’s largest contributors to open-source AI development, surpassing many western firms in collaborative projects. Chinese tech giants similar to Huawei, Alibaba and Tencent are driving open-source AI forward with frameworks like PaddlePaddle, X-Deep Learning (X-DL) and MindSpore — all now core to China’s machine learning ecosystem.
But they’re also making major contributions to global AI projects, from Alibaba’s Dragonfly, which streamlines large-scale data distribution, to Baidu’s Apollo, an open-source platform accelerating autonomous vehicle development. These efforts don’t just strengthen China’s AI industry, they embed it deeper into the worldwide AI landscape.
This shift had been years within the making, as Chinese firms (with state backing) pushed open-source AI forward and made their models publicly available, making a feedback loop that western firms have also – quietly – tapped into. A yr ago, for instance, US firm Abicus.AI released Smaug-72B, an AI model designed for enterprises that built directly upon Alibaba’s Qwen-72B and outperformed proprietary models like OpenAI’s GPT-3.5 and Mistral’s Medium. But the potential for US firms to further construct on Chinese open-source technology could also be limited by political in addition to corporate barriers.
In 2023, US lawmakers highlighted growing concerns that China’s aggressive investment in open-source AI and semiconductor technologies would eventually erode western leadership in AI. Some policymakers called for bans on certain open-source chip technologies, because of fears they may further speed up China’s AI advancements.
But by then, China’s AI horse had already bolted.
AI with Chinese characteristics
DeepSeek’s rise must have been obvious to anyone accustomed to management theory and the history of technological breakthroughs linked to “disruptive innovation”. Latecomers to an industry rarely compete by playing the identical game as incumbents – they must be disruptive.
China, facing restrictions on cutting-edge western AI chips and lagging behind in proprietary AI infrastructure, had no selection but to innovate otherwise. Open-source AI provided the proper vehicle: a option to scale innovation rapidly, lower costs and tap into global research while bypassing Silicon Valley’s resource-heavy, closed-source model.
From a western and traditional human rights perspective, China’s embrace of open-source AI may appear paradoxical, given the country’s strict information controls. Its AI development strategy prioritises each technological advancement and strict alignment with the Chinese Communist party’s ideological framework, ensuring AI models adhere to “core socialist values” and state-approved narratives. AI research in China has thrived not only despite these constraints but, in some ways, due to them.
China’s success goes beyond traditional authoritarianism; it embodies what Harvard economist David Yang calls “Autocracy 2.0”. Rather than relying solely on fear-based control, it uses economic incentives, bureaucratic efficiency, and technology to administer information and maintain regime stability.
The Chinese government has strategically encouraged open-source development while maintaining tight control over AI’s domestic applications, particularly in surveillance and censorship. Indeed, authoritarian regimes can have a major advantage in developing facial-recognition technology because of their extensive surveillance systems. The vast amounts of information collected through these networks enable private AI firms to create advanced algorithms, which might then be adapted for business uses, potentially accelerating economic growth.
China’s AI strategy is built on a dual foundation of state-led initiatives and private-sector innovation. The country’s AI roadmap, first outlined within the 2017 latest generation artificial intelligence development plan, follows a three-phase timeline: achieving global competitiveness by 2020, making major AI breakthroughs by 2025, and securing world leadership in AI by 2030. In parallel, the federal government has emphasised data governance, regulatory frameworks and ethical oversight to guide AI development “responsibly”.
A defining feature of China’s AI expansion has been the huge infusion of state-backed investment. Over the past decade, government enterprise capital funds have injected roughly US$912 billion (£737bn) into early-stage firms, with 23% of that funding directed toward AI-related firms. A significant slice has targeted China’s less-developed regions, following local investment mandates.
Compared with private enterprise capital, government-backed firms often lag in software development but exhibit rapid growth post-investment. Moreover, state funding often serves as a signal for subsequent private-sector investment, reinforcing the country’s AI ecosystem.
China’s AI strategy represents a departure from its traditional industrial policies, which historically emphasised self-sufficiency, support for a handful of national champions, and military-driven research. Instead, the federal government has embraced a more flexible and collaborative approach that encourages open-source software adoption, a various network of AI firms, and public-private partnerships to speed up innovation. This model prioritises research funding, state-backed AI laboratories, and AI integration across key industries including security, healthcare, and infrastructure.
Despite strong state involvement, China’s AI boom is equally driven by private-sector innovation. The country is home to an estimated 4,500 AI firms, accounting for 15% of the world’s total.
As economist Liu Gang told the Chinese Communist Party’s Global Times newspaper: “The development of AI is fast in China – for instance, for AI-empowered large language models. Aided with government spending, private capital is flowing to the brand new sector. Increased capital inflow is anticipated to further enhance the sector in 2025.”
China’s tech giants including Baidu, Alibaba, Tencent and SenseTime have all benefited from substantial government support while remaining competitive on the worldwide stage. But unlike within the US, China’s AI ecosystem thrives on a posh interplay between state support, corporate investment and academic collaboration.
Recognising the potential of open-source AI early on, Tsinghua University in Beijing has emerged as a key innovation hub, producing leading AI startups similar to Zhipu AI, Baichuan AI, Moonshot AI and MiniMax — all founded by its faculty and alumni. The Chinese Academy of Sciences has similarly played an important role in advancing research in deep learning and natural language processing.
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Unlike the west, where firms like Google and Meta promote open-source models for strategic business gains, China sees them as a way of national technological self-sufficiency. To this end, the National AI Team, composed of 23 leading private enterprises, has developed the National AI Open Innovation Platform, which provides open access to AI datasets, toolkits, libraries and other computing resources.
DeepSeek is a first-rate example of China’s AI strategy in motion. The company’s rise embodies the federal government’s push for open-source collaboration while remaining deeply embedded inside a state-guided AI ecosystem. Chinese developers have long been major contributors to open-source platforms, rating because the second-largest group on GitHub by 2021.
Weibo via Wikimedia
Founded by Chinese entrepreneur Liang Wenfeng in 2023, DeepSeek has positioned itself as an AI leader while benefiting from China’s state-driven AI ecosystem. Liang, who also established the hedge fund High-Flyer, has maintained full ownership of DeepSeek and avoided external enterprise capital funding.
Though there is no such thing as a direct evidence of presidency financial backing, DeepSeek has reaped the rewards of China’s AI talent pipeline, state-sponsored education schemes, and research funding. Liang has engaged with top government officials including China’s premier, Li Qiang, reflecting the corporate’s strategic importance to the country’s broader AI ambitions.
In this manner, DeepSeek perfectly encapsulates “AI with Chinese characteristics” – a fusion of state guidance, private-sector ingenuity, and open-source collaboration, all rigorously managed to serve the country’s long-term technological and geopolitical objectives.
Recognising the strategic value of open-source innovation, the federal government has actively promoted domestic open-source code platforms like Gitee to foster self-reliance and insulate China’s AI ecosystem from external disruptions. However, this also exposes the bounds of China’s open-source ambitions. The government pushes collaboration, but only inside a tightly controlled system where state-backed firms and tech giants call the shots.
Reports of censorship on Gitee reveal how Beijing rigorously manages innovation, ensuring AI advances stay in step with national priorities. Independent developers can contribute, but the actual power stays concentrated in firms that operate inside the federal government’s strategic framework.
The conflicted reactions of US big tech
DeepSeek’s emergence has sparked intense debate across the AI industry, drawing a spread of reactions from leading Silicon Valley executives, policymakers and researchers. While some view it as an expected evolution of open-source AI, others see it as a direct challenge to western AI leadership.
Microsoft’s CEO, Satya Nadella, emphasised its technical efficiency. “It’s super-impressive by way of each how they’ve really effectively done an open-source model that does this inference-time compute, and is super-compute efficient,” Nadella told CNBC. “We should take the developments out of China very, very seriously”.
Silicon Valley enterprise capitalist Marc Andreessen, a outstanding advisor to Trump, was similarly effusive. “DeepSeek R1 is probably the most amazing and impressive breakthroughs I’ve ever seen – and as open source, a profound gift to the world,” he wrote on X.
For Yann LeCun, Meta’s chief AI scientist, DeepSeek is less about China’s AI capabilities and more concerning the broader power of open-source innovation. He argued that the situation ought to be read not as China’s AI surpassing the US, but fairly as open-source models surpassing proprietary ones. “DeepSeek has profited from open research and open source (e.g. PyTorch and Llama from Meta),” he wrote on Threads. “They got here up with latest ideas and built them on top of other people’s work. Because their work is published and open source, everyone can benefit from it. That is the ability of open research and open source.”
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Not all responses were so measured. Alexander Wang, CEO of Scale AI – a US firm specialising in AI data labelling and model training – framed DeepSeek as a competitive threat that demands an aggressive response. He wrote on X: “DeepSeek is a wake-up call for America, nevertheless it doesn’t change the strategy: USA must out-innovate & race faster, as we’ve got done in your complete history of AI. Tighten export controls on chips in order that we will maintain future leads. Every major breakthrough in AI has been American.”
Elon Musk added fuel to speculation about DeepSeek’s hardware access when he responded with a straightforward “obviously” to Wang’s earlier claims on CNBC that DeepSeek had secretly acquired 50,000 Nvidia H100 GPUs, despite US export restrictions.
Beyond the tech world, US policymakers have taken a more adversarial stance. House speaker Mike Johnson accused China of leveraging DeepSeek to erode American AI leadership. “They abuse the system, they steal our mental property. They’re now attempting to get a leg up on us in AI.”
For his part, Trump took a more pragmatic view, seeing DeepSeek’s efficiency as a validation of cost-cutting approaches. “I view that as a positive, as an asset … You won’t be spending as much, and also you’ll get the identical result, hopefully.”
The rise of DeepSeek can have helped jolt the Trump administration into motion, resulting in sweeping policy shifts geared toward securing US dominance in AI. In his first week back within the White House, the US president announced a series of aggressive measures, including massive federal investments in AI research, closer partnerships between the federal government and personal tech firms, and the rollback of regulations seen as slowing US innovation.
The administration’s framing of AI as a critical national interest reflects a broader urgency sparked by China’s rapid advancements, particularly DeepSeek’s ability to provide cutting-edge models at a fraction of the fee traditionally related to AI development. But this response will not be nearly national competitiveness – it’s also deeply entangled with private industry.
Musk’s growing closeness to Trump, for instance, will be viewed as a calculated move to guard his own dominance at home and abroad. By aligning with the administration, Musk ensures that US policy tilts in favour of his AI ventures, securing access to government backing, computing power, and regulatory control over AI exports.
At the identical time, Musk’s public criticism of Trump’s US$500 billion AI infrastructure plan – claiming the businesses involved lack the crucial funding – was as much a warning as a dismissal, signalling his intent to shape policy in a way that advantages his empire while keeping potential challengers at bay.
Not unrelated, Musk and a bunch of investors have just launched a US$97.4 billion (£78.7bn) bid for OpenAI’s nonprofit arm, a move that escalates his feud with OpenAI CEO Sam Altman and seeks to strengthen his grip on the AI industry. Altman has dismissed the bid as a “desperate power grab”, insisting that OpenAI is not going to be swayed by Musk’s attempts to reclaim control. The spat reflects how DeepSeek’s emergence has thrown US tech giants into what could possibly be all-out war, fuelling bitter corporate rivalries and reshaping the fight for AI dominance.
And while the US and China escalate their AI competition, other global leaders are pushing for a coordinated response. The Paris AI Action Summit, held on February 10 and 11, has turn out to be a focus for efforts to stop AI from descending into an uncontrolled power struggle. France’s president, Emmanuel Macron, warned delegates that without international oversight, AI risks becoming “the wild west”, where unchecked technological development creates instability fairly than progress.
But at the tip of the two-day summit, the UK and US refused to sign a global commitment to “ensuring AI is open, inclusive, transparent, ethical, protected, secure and trustworthy … making AI sustainable for people and the planet”. China was among the many 61 countries to sign this declaration.
Abaca Press/Alamy Stock Photo
Concerns have also been raised on the summit about how AI-powered surveillance and control are enabling authoritarian regimes to strengthen repression and reshape the citizen-state relationship. This highlights the fast-growing global industry of digital repression, driven by an emerging “authoritarian-financial complex” that will exacerbate China’s strategic advancement in AI.
Equally, DeepSeek’s cost-effective AI solutions have created a gap for European firms to challenge the standard AI hierarchy. As AI development shifts from being solely about compute power to strategic efficiency and accessibility, European firms now have a possibility to compete more aggressively against their US and Chinese counterparts.
Whether this marks a real rebalancing of the AI landscape stays to be seen. But DeepSeek’s emergence has actually upended traditional assumptions about who will lead the subsequent wave of AI innovation – and the way global powers will reply to it.
End of the ‘Silicon Valley effect’?
DeepSeek’s emergence has forced US tech leaders to confront an uncomfortable reality: they underestimated China’s AI capabilities. Confident of their perceived lead, firms like Google, Meta, and OpenAI prioritised incremental improvements over anticipating disruptive competition, leaving them vulnerable to a rapidly evolving global AI landscape.
In response, the US tech giants are actually scrambling to defend their dominance, pledging over US$400 billion in AI investment. DeepSeek’s rise, fuelled by open-source collaboration, has reignited fierce debates over innovation versus security, while its energy-efficient model has intensified scrutiny on AI’s sustainability.
Yet Silicon Valley continues to cling to what many view as outdated economic theories similar to the Jevons paradox to downplay China’s AI surge, insisting that greater efficiency will only fuel demand for computing power and reinforce their dominance. Companies like Meta, OpenAI and Microsoft remain fixated on scaling computational power, betting that expensive hardware will secure their lead. But this assumption blinds them to a shifting reality.
DeepSeek’s rise because the potential “Walmart of AI” is shaking Silicon Valley’s foundation, proving that high-quality AI models will be built at a fraction of the fee. By prioritising efficiency over brute-force computing power, DeepSeek is difficult the US tech industry’s reliance on expensive hardware like Nvidia’s high-end chips.
This shift has already rattled markets, driving down the stock prices of major US firms and forcing a reassessment of AI dominance. Nvidia, whose business relies on supplying high-performance processors, appears particularly vulnerable as DeepSeek’s cost-effective approach threatens to scale back demand for premium chips.
The growing divide between the US and China in AI, nonetheless, is greater than just competition – it’s a clash of governance models. While US firms remain fixated on protecting market dominance, China is accelerating AI innovation with a model that’s proving more adaptable to global competition.
If Silicon Valley resists structural change, it risks falling further behind. We may witness the unravelling of the “Silicon Valley effect”, through which tech giants have long manipulated AI regulations to entrench their dominance. For years, Google, Meta,and OpenAI shaped policies that favoured proprietary models and expensive infrastructure, ensuring AI development remained under their control.
DeepSeek is redefining AI with breakthroughs in code intelligence, vision-language models and efficient architectures that challenge Silicon Valley’s dominance. By optimising computation and embracing open-source collaboration, DeepSeek shows the potential of China to deliver cutting-edge models at a fraction of the fee, outperforming proprietary alternatives in programming, reasoning and real-world applications.
More than a policy-driven rise, China’s AI surge reflects a fundamentally different innovation model – fast, collaborative and market-driven – while Silicon Valley holds on to expensive infrastructure and rigid proprietary control. If US firms refuse to adapt, they risk losing the longer term of AI to a more agile and cost-efficient competitor.
A brand new era of geotechnopolitics
But China will not be just disrupting Silicon Valley. It is expanding “geotechnopolitics”, where AI is a battleground for global power. With AI projected to add US$15.7 trillion to the worldwide economy by 2030, China and the US are racing to regulate the technology that can define economic, military and political dominance.
DeepSeek’s advancement has raised national security concerns within the US. Trump’s government is considering stricter export controls on AI-related technologies to stop them from bolstering China’s military and intelligence capabilities.
As AI-driven defence systems, intelligence operations and cyber warfare redefine national security, governments must confront a brand new reality: AI leadership will not be nearly technological superiority, but about who controls the intelligence that can shape the subsequent era of worldwide power.
China’s AI ambitions extend beyond technology, driving a broader strategy for economic and geopolitical dominance. But with over 50 state-backed firms developing large-scale AI models, its rapid expansion faces growing challenges, including soaring energy demands and US semiconductor restrictions.
China’s president, Xi Jinping, stays resolute, stating: “Whoever can grasp the opportunities of recent economic development similar to big data and artificial intelligence can have the heart beat of our times.” He sees AI driving “latest quality productivity” and modernising China’s manufacturing base, calling its “head goose effect” a catalyst for broader innovation.
To counter western containment, China has embraced a “guerrilla” economic strategy, bypassing restrictions through alternative trade networks, deepening ties with the worldwide south, and exploiting weaknesses in global supply chains. Instead of direct confrontation, this decentralised approach uses economic coercion to weaken adversaries while securing China’s own industrial base.
China can be leveraging open-source AI as an ideological tool, presenting its model as more collaborative and accessible than western alternatives. This narrative strengthens its global influence, aligning with nations in search of alternatives to western digital control. While strict state oversight stays, China’s embrace of open-source AI reinforces its claim to a future where innovation is driven not by corporate interests but through shared collaboration and global cooperation.
But while DeepSeek claims to be open access, its secrecy tells a distinct story. Key details on training data and fine-tuning remain hidden, and its compliance with China’s AI laws has sparked global scrutiny. Italy has banned the platform over data-transfer risks, while Belgium and Ireland launched privacy probes.
Under Chinese regulations, DeepSeek’s outputs must align with state-approved narratives, clashing with the EU’s AI Act, which demands transparency and protects political speech. Such “controlled openness” raises many red flags, casting doubt on China’s place in markets that value data security and free expression.
Many western commentators are seizing on reports of Chinese AI censorship to border other models as freer and more politically open. The revelation that a number one Chinese chatbot actively modifies or censors responses in real time has fuelled a broader narrative that western AI operates without such restrictions, reinforcing the concept democratic systems produce more transparent and unbiased technology. This framing serves to bolster the argument that free societies will ultimately lead the worldwide AI race.
But at its heart, the “AI arms race” is driven by technological dominance. The US, China, and the EU are charting different paths, weighing security risks against the necessity for global collaboration. How this competition is framed will shape policy: lock AI behind restrictions, or push for open innovation.
DeepSeek, for all its transformational qualities, continues to exemplify a model of AI where innovation prioritises scale, speed and efficiency over societal impact. This drive to optimise computation and expand capabilities overshadows the necessity to design AI as a very public good. In doing so, it eclipses this technology’s real potential to remodel governance, public services and social institutions in ways in which prioritise collective wellbeing, equity and sustainability over corporate and state control.
A really global AI framework requires greater than political or technological openness. It demands structured cooperation that prioritises shared governance, equitable access, and responsible development. Following a workshop in Shanghai hosted by the Chinese government last September, the UN’s general secretary, António Guterres, outlined his vision for AI beyond corporate or state control: “We must seize this historic opportunity to put the foundations for inclusive governance of AI – for the advantage of all humanity. As we construct AI capability, we must also develop shared knowledge and digital public goods.”
Both the west and China frame their AI ambitions through competing notions of “openness” – each aligning with their strategic interests and reinforcing existing power structures.
Western tech giants claim AI drives democratisation, yet they often dominate digital infrastructure in parts of Africa, Asia and Latin America, exporting models based on “corporate imperialism” that extract value while disregarding local needs. China, in contrast, positions itself as a technological partner for the remainder of the worldwide south; nonetheless, its AI stays tightly controlled, reinforcing state ideology.
China’s proclaimed view on international AI collaboration emphasises that AI shouldn’t be “a game of wealthy countries”“, as President Xi stated through the 2024 G20 summit. By advocating for inclusive global AI development, China positions itself as a frontrunner in shaping international AI governance, especially via initiatives just like the UN AI resolution and its AI capacity-building motion plan. These efforts help promote a more balanced technological landscape while allowing China to strengthen its influence in global AI standards and frameworks.
However, beneath all these narratives, each China and the US share a technique of AI expansion that relies on exploited human labour, from data annotation to moderation, exposing a system driven less by innovation than by economic and political control.
Seeing AI as a connected race for influence highlights the necessity for ethical deployment, cross-border cooperation, and a balance between security and progress. And that is where China may face its best challenge – balancing the ability of open-source innovation with the constraints of a tightly controlled, authoritarian system that thrives on restriction, fairly than openness.
