DeepSeek AI Brings Trump And His Good Friends Back To Planet Earth

Poor Donald Trump. Barely a week ago, he and his tech bro pals appeared to be on top of the world and in control of it. They were riding on the back of trillions of dollars of wealth riding in turn on top of trillions of dollars of market capitalisation gain in businesses ranging from e-commerce and search to social networks and electric cars.

If there was any problem that raised its head, it could be swatted down with a threat of tariffs or a stern gaze, as the US president did with a flourish with Colombia and brought the Latin American nation in line to take back illegal immigrants.

But along came DeepSeek, a free, open-source large-language model launched in late December, apparently developed in just two months for less than $6 million — much lower than what it took for OpenAI in the US.

Last week, the company released a reasoning model that also reportedly outperformed OpenAI’s latest in many third-party tests.

The result: stock prices of almost all tech majors started spiralling downwards on Monday, including artificial intelligence (AI) chip giant NVidia. Losses were expected to cross more than $1 trillion in value.

Global Shock Waves

Why are the stocks crashing?

Because DeepSeek has raised questions about the amount of money big tech companies have been investing in AI models and data centres.

“DeepSeek clearly doesn’t have access to as much compute as US hyperscalers and somehow managed to develop a model that appears highly competitive,” Srini Pajjuri, semiconductor analyst at Raymond James, said in a note Monday reported by CNBC.

As other analysts pointed out, this also raises questions on the entire AI supply chain, not just the software but the hardware that powers the software as well.

On one side there is the US and its new Stargate Project, a massive $500 billion pledge with backing from the biggest names in tech to build data centres across the country. On the other, a scrappy Chinese startup that’s released an impressive open-source model trained on a shoestring budget, wrote Fortune columnist Nicholas Gordon last week.

Back home, what sense would it make for a company like Reliance to invest $20 to $30 billion, according to Bloomberg estimates, in a data centre in a far corner of the country on the west coast of Gujarat with capacities three times that of all of India’s?

Those questions are yet to be posed because it will take a day or two for the global shock waves to subside.

Meanwhile, there will be questions on how much computing capacity is really required, at what cost and if the Chinese can come up with this killer price, then could others do this too?

Obviously, we don’t know right now.

Meta CEO Mark Zuckerberg said last week they would invest between $60 billion and $65 billion in capital expenditures on AI in 2025.

He also said he expects Meta AI to “be the leading assistant serving more than 1 billion people” this year and that Meta’s Llama 4 model is expected to “become the leading state of the art model” this year, and that the company plans to “build an AI engineer” that can contribute more code to its research and development efforts.

So what happens now?

Every tech CEO knows in his or her heart and mind that technology changes can come out of nowhere and overturn business models that seemed solid just a day ago.

Covid kicked off a wave of investment in people and infrastructure at a pace not seen for a while in Silicon Valley as it appeared that our lives were becoming rapidly digital and could stay that way.

A year later, the major tech firms including Meta, Google and Amazon were downsizing furiously, laying off tens of thousands.

AI happened and stock prices shot up again and once again the Valley was in full control. The tech bros worked on securing and cementing their future and also indulged in world opinion domination, by standing alongside Donald Trump, who has been only too glad to welcome them.

AI’s Sputnik Moment?

And then came DeepSeek.

If Trump and team thought the China trade war would be largely about cheap imports of apparel, toys, furniture and leather, this would be a big shock.

China is now demonstrating that it can do a lot more cheaply, even if people argue it is more than $6 million, it’s still a knock-out punch that comes from nowhere.

Thomas Friedman wrote in The New York Times in mid-December — Donald Trump’s “relentless China-bashing and tariffs during his first term as president lit a fire under Beijing to double down on its efforts to gain global supremacy in electric cars, robots and rare materials, and to become as independent of America’s markets and tools as possible”.

“China had its Sputnik moment — his name was Donald Trump,” Jim McGregor, a business consultant who lived in China for 30 years, told Friedman.

“He woke them up to the fact that they needed an all-hands-on-deck effort to take their indigenous scientific, innovative and advanced manufacturing skills to a new level.”

Bizarrely, Silicon Valley venture capitalist and Donald Trump advisor Marc Andreessen on Monday described DeepSeek-R1 as "AI's Sputnik moment".

Sputnik was the first artificial Earth satellite that was launched by the Soviet Union in 1957 and then set off the US space race which led to the first man on the moon.

Where will DeepSeek land and how firmly? We don’t know yet but for now, it does look like Trump and his good friends will have to descend to Earth from their lofty heights.