By Ben Chacko
LONDON: A significant milestone occurred this week when a technological breakthrough from China resulted in a drop of over a trillion dollars in corporate values on the US stock market for the first time.
The artificial intelligence firm DeepSeek triggered this decline by demonstrating its ability to achieve results comparable to those of US-based AI giants, but at a much lower cost.
This situation is partly a consequence of a misstep by the US government. By imposing sanctions on microchip exports to China, it inadvertently compelled Chinese developers to optimize the efficiency of their chips.
As a result, these developers now require less memory to perform the same tasks as products from OpenAI, Meta, Google, and other American companies.
This spells trouble for these monopolies as they seek funding to invest hundreds of billions into AI development.
Notably, chip manufacturer Nvidia has faced severe stock market repercussions due to the advancements made by DeepSeek, which could reduce the demand for its products if Chinese technology becomes the new industry benchmark.
However, there is a broader implication to consider. The era in which China’s economic progression depended primarily on external technological innovations is coming to an end.
DeepSeek’s founder, Liang Wenfeng, articulates this shift: “For many years, Chinese companies relied on others for technological innovation, while we concentrated on monetizing applications — but this is not a fixed future.
“In this new phase, our goal is not merely to capitalize quickly, but to reach the technical frontier and foster the growth of the entire ecosystem… We believe that as the economy matures, China should evolve into a contributor rather than a passive beneficiary.”
This moment has been likened to the “Sputnik moment” of 1957, when the Soviet Union launched the first satellite into orbit.
However, unlike the advances in Soviet science, which did not translate into widespread economic successes, today’s challenge to US supremacy is more pronounced. AI has the potential for a transformative effect on human life, arguably greater than that of space exploration.
The Chinese economy continues to advance rapidly, nearly matching the United States in gross domestic product, although it still trails on a per capita basis.
It is likely that achievements by one segment of the Chinese economy will soon be adopted across the industry, given the government’s ability to steer development effectively through a combination of market incentives and socialist planning.
Consequently, it is no surprise that Donald Trump deemed the developments at DeepSeek a “wake-up call.” His administration’s international policies are expected to focus on great power competition.
China stands as the primary target, given its increasing economic and political clout, which poses a significant challenge to the waning US-led global order.
US companies will likely react by adopting DeepSeek’s chip-efficient methodologies. Despite the rhetoric surrounding deregulation and market control, national security concerns will heavily influence Washington’s response, similar to the reactions during the Sputnik era.
Of course, broader issues regarding the governance and development of AI, particularly its effects on the labor market, will remain pressing, regardless of who spearheads its advancement.
This week’s events undoubtedly mark a turning point in the decline of US hegemony and the evolution of global multipolarity, an outcome that, despite its complexities, may be seen as a positive development. (IPA Service)
Courtesy: Morning Star
