The DeepSeek disruption

In September 2017, Russian President Vladimir Putin declared, “Artificial intelligence is the future, not only for Russia, but for all humankind. It comes with colossal opportunities but also threats that are difficult to predict. Whoever becomes the leader in this sphere will become the ruler of the world.”

The emergence of DeepSeek and other Chinese artificial intelligence (AI) advancements underscores the increasingly complex rivalry between China and the West in the field of artificial intelligence. While the West continues to lead in foundational AI research, China’s ability to scale and deploy AI technologies rapidly is creating a new kind of competitive landscape. In the coming years, this rivalry will likely intensify, with both sides racing to not only innovate but also define the rules of the AI era.

Nasdaq, the American tech-heavy stock index, tanked as a Chinese startup rattled faith in US leadership and profitability in AI, taking a hammer to Nvidia (NVDA) – the leading maker of chips used in AI - wiping out a record $589 billion in market value.

Nasdaq and S&P 500 were rattled by reports that China’s DeepSeek uses cheaper chips and less data than leading models but performs equally well. A surge in DeepSeek’s popularity has spurred investors to question bets that AI demand-driven growth will keep fuelling stock gains.

US President Donald Trump called the industry-changing event a "wake-up call" for Silicon Valley to explore more efficient avenues to maintain US technological dominance.

In recent years, China has increasingly positioned itself as a formidable player in the field of AI, with ambitions to dominate the global AI landscape. One of the latest signals of this challenge is the emergence of DeepSeek, a cutting-edge AI platform that showcases China’s rapid strides in AI research and development.

China’s AI journey has been marked by remarkable progress, largely driven by state-backed initiatives, a rich repository of data, and a highly motivated workforce of researchers and engineers. With AI seen as one of the primary areas for future economic and geopolitical power, China has made AI a national priority. In 2017, the Chinese government unveiled its ambitious plan to become the world leader in AI by 2030, focusing on everything from AI infrastructure to funding for research projects.

In this context, AI giants such as Baidu, Alibaba, Tencent, and more recently startups like DeepSeek, have become integral players in China’s AI ecosystem. The acceleration of AI development in China is driven by innovation and a regulatory environment that enables rapid scaling and deployment of new technologies.

DeepSeek is a groundbreaking example of China’s AI capabilities. This platform, developed by a team of Chinese researchers, is designed to push the boundaries of AI in both its technical sophistication and its applications. DeepSeek has demonstrated impressive advances in natural language processing, machine learning, and computer vision – areas that are also key focal points for Western AI research.

One of the standout features of DeepSeek is its ability to handle large-scale data processing and identify patterns at speeds that were once unimaginable. The platform is capable of integrating data from disparate sources, which allows it to generate insights across a range of industries, from healthcare and finance to autonomous systems and surveillance.

Sam Altman, the CEO of OpenAI, has emphasised the transformative potential of AI systems like DeepSeek. "China has shown a tremendous capacity for scaling technology quickly," Altman remarked during a recent interview. “Platforms like DeepSeek are a testament to China’s ability to not only innovate but to deploy AI at an unprecedented speed. It’s a model the West has yet to fully match.”

The Chinese model of AI development places significant emphasis on scaling and application over ethical considerations in certain cases. For instance, China has been at the forefront of deploying AI in public security and surveillance, leveraging facial recognition systems and predictive analytics to monitor large populations. This has raised concerns in the West about privacy, human rights, and the implications of mass data collection, particularly in authoritarian regimes.

The West has long been the leader in AI research, with companies like Google, Microsoft, and OpenAI leading the charge in developing innovative solutions. However, the rise of DeepSeek and other Chinese platforms signals a shift in the balance of power. In terms of research output, China has now surpassed the US in the number of AI-related publications and patents, a trend that is likely to accelerate with government backing and increasing private-sector investment.

Dr Fei-Fei Li, a prominent AI researcher at Stanford University, recently commented, “While the United States has a long history of AI leadership, China’s ability to rapidly scale applications like DeepSeek shows that they are not just catching up – they are actively changing the dynamics of global competition. The question is whether Western values around data privacy and regulation will hold up against such momentum.”

The core difference between Chinese and Western AI approaches lies in the ability to leverage vast amounts of data. China’s more relaxed regulatory environment allows for the aggregation and use of enormous datasets, which can be crucial for training powerful machine learning algorithms. Meanwhile, in the West, privacy regulations such as the General Data Protection Regulation (GDPR) in Europe and ongoing scrutiny in the US limit the scope of data use.

The growing strength of Chinese AI presents a direct challenge to the West in several ways. First, AI is not only a tool for economic growth but also a key component of national security. With AI applications ranging from cybersecurity to autonomous weapons, whoever controls the most advanced AI systems holds a strategic advantage.

China’s development of AI technologies such as DeepSeek could reshape global markets, challenging Western dominance in fields like tech, healthcare, and manufacturing. Moreover, AI-driven solutions could fuel China’s Belt and Road Initiative (BRI), enabling China to extend its influence across developing nations by providing advanced AI-powered infrastructure and services.

In a recent panel discussion, Bill Gates, co-founder of Microsoft, reflected on the growing challenges in AI competition. "China’s focus on AI isn't just about technology; it's about setting the stage for the future of global power. We are entering an era where AI will not only impact economies but define the strategic frameworks of nations."

The US and Europe have responded to this challenge by ramping up their own investments in AI research and development, recognising the need to foster innovation while safeguarding democratic values and ethical standards. But as DeepSeek exemplifies, China is not only innovating but also deploying these technologies with speed, a feature that could outpace Western efforts in terms of real-world application.

While DeepSeek and other Chinese AI platforms promise impressive advancements, they also raise critical ethical questions. The accelerated use of AI technologies in surveillance, predictive policing, and social control has been criticised for undermining individual freedoms. Unlike the West, where ethical considerations around AI are a central focus, China’s AI landscape appears less concerned with the societal implications of its innovations.

“AI innovation without ethical oversight is a double-edged sword”, warned Timnit Gebru, a prominent AI researcher and co-founder of the Black in AI organisation. “China is demonstrating how quickly AI can be applied to control and surveil populations. While this may be effective for the state, it raises serious ethical questions that the world will have to grapple with as these technologies proliferate.”

The difference in regulatory philosophies – between China’s focus on rapid technological progress and the West’s emphasis on ethical guidelines – could influence the global trajectory of AI. Will China’s approach dominate, especially in emerging markets, or will the West’s more cautious and ethically grounded stance prevail in shaping the future of AI?

As AI continues to shape the future of industries, economies, and societies, it remains to be seen whether China’s aggressive, data-driven approach will lead to global dominance or whether the West’s focus on ethical AI will win the day. The competition between these two powers will not only determine the future of AI but also the trajectory of global geopolitical and economic power.

The writer is former head of Citigroup’s emerging markets investments and author of ‘The Gathering Storm’.