M. Ahmet Karabay
Today’s China was born from the greed of American capitalism. Starting in the 1980s, U.S. companies leveraged China’s cheap labor to further enrich themselves. By the 2000s, China had become not only America’s but also Europe’s production hub. Today, we discuss when this Far Eastern giant will claim the title of “the world’s greatest power.” The advancements in artificial intelligence (AI) are raising questions about when the U.S. might lose its crown.
In recent years, we’ve been discussing the point AI has reached and how it will transform our lives. Experts unanimously agree on one thing: “Just as the invention of the printing press changed the world and the internet revolutionized life since its inception, AI will now drive change in the same way.”
AI didn’t appear out of nowhere—it advanced rapidly and has already begun transforming life at its core. Experts say the changes AI has brought so far are but a drop in the ocean compared to what’s coming.
Until recently, the U.S. seemed to monopolize AI. Companies investing in this field quickly became global giants. NVIDIA, for example, rose to dominance in the U.S. stock market, surpassing Microsoft and Apple in a short time.
- May 2023: $1 trillion market cap
- February 2024: $2 trillion
- June 2024: $3 trillion
- On June 18, 2024, NVIDIA became the most valuable publicly traded company in the world.
CHINA’S DEEPSEEK SHOCKS THE U.S. LIKE SPUTNIK IN 1957
While everything seemed to be going well for OpenAI, a report from China emerged last week. China announced it had developed an infrastructure comparable to OpenAI’s $600 million model, o1, with just a $6 million investment.
DeepSeek R1 not only has a low-cost setup but is also cheaper to operate.
- OpenAI charges over $100 per million tokens;
- DeepSeek achieves the same for under $4.
- Moreover, the Chinese version is open-source, allowing users to customize it.
- While ChatGPT reportedly requires 10,000 NVIDIA GPUs to process its training data, DeepSeek engineers claim to have achieved similar results with only 2,000 GPUs.
These features catapulted DeepSeek to the top spot on the U.S. App Store in just one week. This success sent Silicon Valley into a frenzy. The New York Stock Exchange saw sharp declines from the opening bell, with stock screens turning red within hours.
This scenario is unprecedented for the U.S. By the time this article was written, NVIDIA, with a market cap of $3 trillion, had lost $500 billion—one-sixth of its value—in just half a day. The total losses in U.S. stock markets reached $1 trillion. These losses even impacted Turkey’s Istanbul Stock Exchange, whose total market value is less than $150 billion (just one-third of NVIDIA’s daily loss).
For Silicon Valley, January 28, 2024, will go down as its darkest day. DeepSeek has not only highlighted a paradigm shift long in the making but also revealed its destructive consequences. The once-invincible Silicon Valley now faces defeat.
Beijing not only outpaced the U.S. but also humiliated it technologically. This parallels the 1957 Sputnik Crisis, when the Soviet Union launched the first artificial satellite, dealing the U.S. a major blow. The U.S. acknowledged this embarrassment and accelerated its space programs, eventually leaving the USSR far behind.
THE MIND BEHIND DEEPSEEK: LIANG WENFEN
DeepSeek’s founder, Liang Wenfen, born in 1985, specializes in automating processes using mathematical and statistical models, and even creating new tools and models as needed—a form of financial engineering.
In 2015, Liang and two other Chinese engineers established a fund, using algorithmic trading for stocks. The fund grew, and they went public on the Hong Kong Stock Exchange.
- 2019: They launched “High-Flyer AI,” an algorithm for stock trading.
- 2020: Released Fire-Flyer I, a supercomputer for AI and deep learning.
- 2021: Introduced Fire-Flyer II, an upgraded version.
DeepSeek’s progress has deeply unsettled the U.S. and has significant implications for global stock markets. The aftershocks of this disruption will be felt worldwide. The rules of the game are being rewritten.
In 1957, the Soviet Union struck a blow to the U.S. with Sputnik. Today, the People’s Republic of China has delivered a similar blow. However, this time, the consequences will differ greatly.
The U.S. appears powerless in the face of DeepSeek R1. A tweet from OpenAI’s top executive Steven Heidel illustrates this. Referring to DeepSeek, he said, “Just because it’s free, don’t hand your data over to the Chinese Communist Party.”
THE U.S. IS LOSING GROUND
China has already captured:
- Social media (TikTok),
- Electric vehicles (BYD),
- And is on the verge of dominating AI (DeepSeek).
Meanwhile, the U.S. faces a grim reality with once-promising projects now deemed obsolete:
- Grok 2 is dead,
- Gemini Pro is dead,
- GPT-40 is dead,
- Sonnet 3.5 is dead,
- LLaMA 3.1 is dead.
The shock in U.S. markets isn’t just about DeepSeek surpassing OpenAI. It stems from the realization that the fear of losing leadership has now materialized. While the world debates these developments, Turkey remains preoccupied with safeguarding one person’s political dominance at the expense of the nation’s potential.
We missed the Industrial Revolution and have paid the price for centuries. We tried to console ourselves with the excuse of lacking capital back then. But DeepSeek has shown that the Information Age doesn’t require vast capital. What Silicon Valley achieved with $65 billion, DeepSeek accomplished with just $6 million.
