By Anjan Roy
The unexpected launch of a Chinese AI model has disrupted the established landscape of the Western AI sector. Released in the third week of January 2025, this domestically developed AI system sent shockwaves across the industry, leading to unprecedented losses in market capitalization for American tech giants.
Nvidia, previously revered as the dominant force in high-end chip manufacturing, suffered a staggering $500 billion drop in market value almost overnight. Other technology companies, including AI pioneer OpenAI, known for its ChatGPT model, also faced considerable setbacks.
In response, a coalition of US tech powerhouses, including Microsoft and OpenAI, has begun countering the impact of the Chinese AI model, DeepSeek. After overcoming their initial dismay, they are now accusing their Chinese counterparts of plagiarizing the OpenAI model and basing their technology on the innovations of US developers.
Meanwhile, the shortcomings of the Chinese AI model are becoming increasingly apparent, as confirmed by leaders in the Indian tech sector. It has been engineered to operate strictly within the confines of the Chinese Communist Party’s guidelines regarding geopolitics and social issues.
When questioned about the 1989 Tiananmen Square incident, the model declined to respond, stating, “Let’s discuss something else.” It also refrained from providing insights into the ongoing tensions between India and China over Arunachal Pradesh, as well as issues concerning Tibet’s autonomy, instead delivering answers that align with the Chinese government’s policies.
The main reason the Chinese AI model has unsettled the US stock market and diminished the value of its tech giants is attributed to the significantly lower costs of its development. While OpenAI invested over a billion dollars in ChatGPT, the Chinese model was developed for merely $5.6 million. This cost efficiency could prove pivotal in commercial settings, enabling it to outperform alternatives as consumers increasingly seek budget-friendly solutions.
The uproar surrounding the Chinese AI model carries important lessons for India. Despite the availability of the OpenAI model and awareness among Indian tech firms, none have matched the achievements of the Chinese developers.
In the aftermath of the Chinese model’s launch, newly elected US President Donald Trump remarked that this development should serve as a wake-up call for the US industry. The fact that a Chinese company could unveil such an advanced engine while being cut off from access to sophisticated chips and other technology products highlights China’s innovative capabilities.
The Chinese developers have managed to overcome the restrictions imposed by the US, including the suspension of key component supplies. Despite these challenges, they have produced noteworthy advancements. In contrast, Indian companies, which enjoy better relationships with the US and stand at the forefront of American tech firms, have yet to achieve similar innovations.
These trends carry significant implications for the future of AI technology in India. Both OpenAI’s and the Chinese model could disrupt established supply chains, posing a threat to the Indian IT sector, which largely focuses on lower-end IT services and coding jobs, potentially leading to job losses in these areas.
Industry experts predict that the current organizational structure of the IT and IT services sectors could undergo a radical transformation. This raises concerns about the future of Indian IT product suppliers for international companies. Experts urge India to proactively consider the impending challenges and explore strategies to mitigate potential negative impacts.
India has historically excelled in the IT services sector, surpassing China. However, the emergence of the Chinese AI model threatens to undermine India’s position in the ITeS industry, which has significant macroeconomic ramifications for the country.
As India has experienced growth without substantial job creation, the labor-intensive ITeS sector has played a crucial role in providing employment opportunities. A decline in this sector could result in severe economic consequences. (IPA Service)
