A “wake-up call.”

Deep Trouble

President Donald Trump has responded to the rapid rise of the Chinese startup DeepSeek, whose recently released AI model has him and his Silicon Valley pals looking like a bunch of chumps.

“The release of DeepSeek AI from a Chinese company should be a wake-up call for our industries that we need to be laser-focused on competing to win,” Trump said Monday at a GOP event in Florida.

It’s a relatively measured take from Trump, considering his usual — though occasionally wavering — hawkishness on China, complete with a metaphorical stern glance to the domestic tech sector.

The Republican president also added that he viewed the model’s low-cost as a “positive development.”

“Instead of spending billions and billions, you’ll spend less and you’ll come up with hopefully the same solution,” Trump said.

Stars Malign

Released last week, DeepSeek’s open-source R1 model rivals the West’s best at a fraction of the cost. It was developed using older Nvidia AI chips, for purportedly under $6 million. Despite these limitations, R1 matches up to leading chatbots like OpenAI’s o1 model, and in certain benchmarks, even surpasses them.

For Trump and his tech allies — themselves often recent convertees to his political enclave — the timing couldn’t have been worse. The new administration had just announced its Stargate deal, which would raise $500 billion of private capital towards building AI infrastructure in the US. Its backers included OpenAI, Oracle, Softbank, and Emirati state-run investment firm MGX.

That staggering sum is emblematic of the outrageous amounts of capital and processing power that the industry talking heads have been insisting is necessary to develop large AI models. 

Thus far, the preferred way of making AI more powerful has been through scaling, or leveraging more data and adding more AI chips. In other words, making the AI models bigger — which isn’t very efficient, money or energy-wise.

All Caught Up

With DeepSeek riposting without anywhere near the same amount of resources, Stargate’s half-trillion dollar price tag now looks like a ridiculous monument to the tech industry’s arrogance. 

And generally, the stock market agrees. The buzz stirred by the Chinese AI model wiped out over $1 trillion from leading US tech stocks, or about two Stargates worth. Roughly $600 billion of those losses came from Nvidia.

That said, big names like OpenAI CEO Sam Altman and Microsoft CEO Satya Nadella have tried to keep a cool head amidst the chaos, praising Deepseek’s achievements. 

And Trump’s own AI and crypto czar David Sacks opined on X that R1 “shows that the AI race will be very competitive,” stressing that the US “can’t be complacent.”

More on AI: Sam Altman Says OpenAI Is Going to Deliver a Beatdown on DeepSeek