On Monday, January 27th, a Chinese artificial intelligence application called DeepSeek caused turmoil in the US stock market, drawing attention from various sectors and sparking concerns in the White House, Congress, and the tech industry regarding US-China AI competition. The White House indicated that the competition in AI between the US and China will intensify.
The DeepSeek application offers similar functions to the popular ChatGPT chatbot by OpenAI, being able to answer questions and generate text in response to user queries. Its claimed cost of only 6 million dollars, significantly lower than similar products in the West, led to stock market volatility. On Monday, US chipmaker Nvidia saw its stock price drop by nearly 17%, and the tech-focused Nasdaq Composite Index fell by 3%.
Former PayPal executive and current White House AI and cryptocurrency envoy David Sacks expressed on the social media platform X, “DeepSeek R1 indicates that the AI race will be highly competitive, and President Trump’s revocation of Biden’s executive order is correct.”
Sacks explained that the previous administration’s executive orders constrained American AI companies, while Beijing apparently will not impose such restrictions.
Regarding the US-China AI competition, Sacks wrote, “I have confidence in the United States, but we must not be complacent.”
President Trump stated on Monday evening, “The release of the DeepSeek AI by Chinese companies should sound the alarm for our industry, we need to focus entirely on competition in order to win.”
“Because we have the greatest scientists in the world, even Chinese leaders have told me this. They say you have the smartest scientists in the world,” Trump said.
Last week, Trump stated that the US needs to maintain competitiveness with Beijing in developing artificial intelligence. On January 23rd, while signing an executive order, Trump told the media, “We have to be ahead of [Communist] China. We are now far ahead of [Communist] China.”
Biden signed the Executive Order on the “Development and Use of Artificial Intelligence that is Secure, Reliable, and Trustworthy” in October 2023, aiming to strengthen federal oversight of AI security. This policy faced opposition from Republicans from the outset. On Inauguration Day, January 20th, Trump announced the revocation of this executive order, signaling a potential significant shift in US AI regulation direction.
However, Trump retained a recent order issued by the Biden administration. This order requires support for rapidly growing AI data centers to meet their significant energy needs and calls for the leasing of spaces owned by the Department of Defense and Department of Energy.
Market analysts reported that senior analyst and founder of forecasting company Pangaea Policy, Terry Haines, wrote in a report on Monday that despite Sacks’ criticism, the Trump administration is likely to continue the export control policies of the Biden era.
He wrote that the Trump administration may respond to DeepSeek by doubling down on a “private sector strategy,” with the launch of the Stargate initiative last week serving as an example.
Last Tuesday, Trump, along with executives from OpenAI, Oracle, and SoftBank Group, announced the establishment of Stargate at the White House. It is a new US joint venture in artificial intelligence receiving a $500 billion investment, with $100 billion in private funds allocated to power new data centers for AI projects.
“Markets should also expect Trump to double down on investments related to US manufacturing in artificial intelligence,” Haines further wrote, stating that Trump “may see an opportunity to increase Chinese economic pain through tariffs while slowing down the development of DeepSeek.”
Trump told reporters last Saturday that he is considering using emergency powers to provide “tremendous energy” for US companies developing AI models. On Air Force One, he said, “We are already ahead. Soon, we will be way ahead.”
Trump stated on Monday during a House Republican meeting that tariffs will soon be levied on foreign drugs, semiconductors, and metals.
The US House of Representatives Committee on China has long advocated for stricter technological sanctions against Beijing. The committee, over the weekend while focusing on DeepSeek, warned the Department of Commerce that “dangerous loopholes” in US chip export controls could lead to “similar events.”
The committee further expressed concerns about DeepSeek claiming its design adheres to Chinese laws and socialist values.
“If Chinese AI becomes the preferred model for American researchers, don’t be surprised one day when your chatbot remains silent on what happened at Tiananmen Square (the June 4 massacre event),” said a committee member on social media, “This is a battle for the future of human civilization.”
US users utilizing the DeepSeek application reported instances of censorship by the app. The censorship is in line with China’s strict internet controls. An online video segment shows DeepSeek deleting a response in real-time after answering a question about Chinese leader Xi Jinping.
When asked about the deadly location of the 1989 crackdown on students by the Chinese Communist Party at Tiananmen Square, the app currently replies, “I’m sorry, I can’t answer that question. I am an AI assistant designed to provide useful and harmless responses.”