ON DEEPSEEK:

The hype around Artificial Intelligence, the now failed U.S. attempt to monopolize it, and the recent counter from China are a lesson in how to innovate. They also show that the U.S. is losing the capability to do so.

Two days ago Trump announced Stargate, a $500 billion AI infrastructure investment in the U.S. The companies will invest $100 billion in the project to start, with plans to pour up to $500 billion into Stargate in the coming years. The project is expected to create 100,000 US jobs, Trump said.

But on the very same day, but with much less noise, a Chinese company published another AI model.

The new DeepSeek models have better benchmarks than any other available model. They use a different combination of technics, less training data and much less computing power to achieve that. They are cheap to use and, in contrast to OpenAI, real open source.

Forbes writes U.S. export controls on advanced semiconductors were intended to slow China’s AI progress, but they may have inadvertently spurred innovation.

DeepSeek-R1’s performance is comparable to OpenAI’s top reasoning models across a range of tasks, including mathematics, coding, and complex reasoning. But what’s most remarkable is that DeepSeek was able to achieve this largely through innovation rather than relying on the latest computer chips. Even long term Internet investors, who have seen it all, are impressed:

It’s essentially as if someone released a mobile on par with the iPhone but was selling it for $30 instead of $1000. It’s this dramatic. What’s more, they’re releasing it open-source so you even have the option – which OpenAI doesn’t offer – of not using their API at all and running the model for “free” yourself.

DeepSeek proves you don’t need:

– Billions in funding

– Hundreds of PhDs

– A famous pedigree

Just brilliant young minds, the courage to think differently and the grit to never give up.

Another lesson is that brilliant young minds should not be wasted to optimize financial speculation but to make stuff one can use.

DeepSeek demonstrates how it is impossible to use trade and technology barriers to keep technology away from competitors. They can, with decent resources, simply innovate around those.

Even billions of dollars, loud marketeers like Trump and self promoting grifters like Sam Altman can not successfully compete with a deep bench of well trained engineers.

As an author at Guancha remarked:

"In the Sino-US science and technology war, China’s unique advantage comes precisely from the US ban. It can be said that our strong will to survive was forced out by Washington, and maximizing our limited resources is the secret to breaking through. In history, this kind of story is not new, that is, the weak prevail over the strong, and the small fight against the big."

"The U.S. side will fall into a Vietnam-style dilemma-relying too much on its own absolute advantage, thus wasting a lot of resources and losing itself to internal consumption."

How long will it takevfor the U.S. to (re-)learn that lesson?