China springs an Artificial Intelligence shock

A Chinese startup in Hangzhou has put out a new version of generative AI called DeepSeek, using chips of a lower sophistication because of the restrictions imposed on chips by the United States, and it has overtaken ChatGPT, which had come into the market in November 2022.

ChatGPT had shaken up the world as it were, and there began a fierce competition between the big tech companies like Microsoft and Google to get ahead with a more sophisticated version to dominate the market.

The Chinese have done what they seem to know best. They have adapted the AI contrivance and turned out a cheaper one, and DeepSeek has already been downloaded more than ChatGPT on Apple Store. Even as the valuations of the mostly American tech companies soared and investors poured in hundreds of millions of dollars to produce a better version of ChatGPT, the unknown Chinese startup had achieved a commercial breakthrough with the claim that it had invested a mere $6 million.

It is not a surprise that the share prices of the tech companies in New York had tumbled down. Futures on Nasdaq 100 lost 4 per cent, S&P 500 lost 2 per cent. Share prices of chipmaker Nvidia fell by 11 per cent, of Oracle by 8.5 per cent, and AI data analytics company Palantir lost 6.5 per cent. The markets are in a panic, and when the panic subsides, which it will, normalcy would be restored.

But the time of speculative valuation of AI companies is over. But things are yet to be established, to be confirmed. We still need the feedback from DeepSeek as there was from ChatGPT.

Jon Withaar, a portfolio manager at Pictet Asset Management said, “We still don’t know the details and nothing has been 100% confirmed in regards to the claims, but if there truly has been a breakthrough in the cost to train models from $100 million + to this alleged $6 million number this is actually very positive for productivity and AI end users as cost is obviously much lower meaning lower costs of access.” That is a good caveat.

Whether DeepSeek lives up to the hype or not, what has happened is that the market for AI devices has opened up. It is no more the monopoly of the American tech giants and their investors with deep pockets. The American monopoly of AI has been broken. And from China, the pricing down of AI devices could recur in Japan and South Korea.

The threat of technology denial by the US will now become ineffective. But the dangers posed by AI devices in general do not vanish because they are now available at lower prices. The AI contrivances like ChatGPT and DeepSeek can be put to good and harmful uses, and there is need for regulation of some kind. What Sam Altman, the man who led the researchers who put out ChatGPT, had told the members of the US Senate still holds good: the need for regulation, for oversight.

What is also of great interest in the emergence of DeepSeek is that technology cannot remain a secret in the global economy. A new technology is of no use if its products do not sell in the world markets. And however encrypted the technology might be in a device, it will be broken through, and it will be reconstructed.

In more ways than one, global markets are free markets when goods and services are laid out in the open, and the users will find out the insides of the devices that they are using. It is good news for the people, and a sobering news for the tycoons who would want to make a killing with every new technological breakthrough. The radical aspect of DeepSeek is it is an open access device.