By Björn Jeffery, SvD Tech Brief. Published in Svenska Dagbladet on 30 January 2025.
The much-discussed AI model DeepSeek has crashed the stock market — and pushed tech development into a geopolitical phase. Now Trump and Zuckerberg are desperately searching for a countermove that can stop China from seizing the throne.
“I think there are a number of original things they did that we are still digesting.”
When Meta presented its quarterly report on Wednesday evening, there was another company the analyst community would rather have talked about: DeepSeek — the Chinese AI company that had rocked the global economy over the past week. How will things go for Meta and its AI projects, given that the Chinese competitors appear to be so capable?
The same question hung over OpenAI’s major shareholder Microsoft, which also presented its quarterly report the same evening.
“I think DeepSeek has some genuine innovations,” said CEO Satya Nadella.
It is obvious that they do not quite know how DeepSeek managed to achieve its results. And they appear to have been caught completely off guard by how quickly they found themselves facing a new Chinese competitor.
The answers from the two tech leaders also hint at something even more interesting: AI development is entering a new phase. Now it is about geopolitics.
Until now, the AI market has been dominated by a handful of large American companies. Microsoft and OpenAI with ChatGPT have been pitted against Google’s Gemini and Meta’s Llama, with individual challengers like Anthropic also in the mix. Virtually all the major players have their home on the American West Coast and have competed with one another in full view.
Now the view of competition is shifting. Rather than pitting OpenAI against Google, it may increasingly become a national question — the US against China. Well-known venture capitalist Marc Andreessen called DeepSeek the AI world’s “Sputnik moment” — the point at which it suddenly became clear that there were more candidates ready to compete seriously.
In the same analyst call on Wednesday, Mark Zuckerberg made his position plain:
“There will be a new global standard for open-source AI. And for it to be advantageous for us nationally, it is important that it be an American standard.”
What was previously almost self-evident now needs to be stated clearly — because it is being called into question.
The issue has become particularly pressing in the wake of this week’s sharp fall in Nvidia, the chip company whose fortunes are closely tied to AI development. Meta plans to invest around 65 billion dollars — roughly 714 billion kronor — on AI in 2025 alone. Much of that money will flow directly to Nvidia.
The development is driven largely by anxiety about the Chinese AI model DeepSeek R1, which has performed extraordinarily well in comparative benchmarks. What spooked the markets, however, was not its performance — but the cost of developing it. That cost was said to be very low compared to its American equivalents, and moreover it was produced using inferior chips: a necessity for Chinese companies, since the best chips are not permitted to be exported to China.
Whether the claimed low cost is accurate is disputed. There are likely substantial hidden costs that have not been disclosed. Both DeepSeek and China as a whole have every incentive to present themselves as innovators in this space. But the uncertainty alone was enough to send Nvidia’s share price into sharp decline. In a single day, 6,440 billion kronor was wiped out — though the price partially recovered the following day.
Shortly afterwards, Nvidia’s share price was rattled again. This time it was the United States that drove the fall. Donald Trump is reportedly discussing tighter controls on what type of chips can be exported at all. China is Nvidia’s second-largest market, and further trade barriers of this kind could hit the company hard.
China is now regarded by many — for the first time — as a fully-fledged rival to the US in AI. China has long had AI development with several large models that have performed well — among others from tech giants Baidu and Alibaba. But none has broken through in the same way as DeepSeek. It is also possible that China’s hardware constraints have been compensated by innovation on the software side.
It is through this lens that one should understand Trump’s discussions about increased restrictions on Nvidia. This is a larger question than the profit-and-loss accounts of individual companies — it is now about the country as a whole. And the US is a country that does not like to lose.
