China’s DeepSeek kicks off AI arms race

The widespread use of artificial intelligence is coming a lot faster than many executives have anticipated.

A starting gun has fired this week with the global attention to little-known Chinese company DeepSeek, which has implications for all companies.

While the initial concerns were what it meant for the US share market with the price of chip maker and market darling Nvidia hit hard, the fact that US and China are now in a global AI race is a sign that the widespread use of artificial intelligence is coming a lot faster than many executives have anticipated.

Launching his new long-short fund, Ten Cap, with former Tribeca portfolio manager, Jun Bei Liu, in Sydney on Wednesday, former Macquarie Group and Commonwealth Bank executive Jason Todd said the developments should be a wake up call for all executives to get focused on how they were going to incorporate AI into their business.

“This should be a hurry-up for every corporate which isn’t thinking about the implications of AI and what their strategy is to implement it into their business,” he said. “It might come a lot faster than people expect. The thinking was that by 2040, artificial intelligence would be more intelligent than humans. (DeepSeek) came from nowhere. This might speed that time period up.”

As markets absorb the shock of DeepSeek’s apparent success, there has been a more sober look at the implications of its emergence. While it will hit the price of specialist companies such as Nvidia, it also opens up potential for the development of businesses which can benefit from much cheaper, more energy efficient AI.

Its emergence has already thrown down the competitive gauntlet to the US to accelerate the development of AI, with influential Silicon Valley entrepreneur and venture capitalist Marc Andreessen calling it a “Sputnik moment”. The comment was a reference to the US shock in 1957 when the Soviets launched their satellite, Sputnik, prompting the US to invest billions into upgrading its technological edge.

While commentators have expressed concern at China’s newly recognised AI capacity, despite the best efforts of the US administration to deny the country access to cutting edge chips and US AI chatbots, the reality is that both the US and China now see themselves in a competition to accelerate AI in their countries.

The positive implications for Australian companies, with the country’s high cost base and the increasing drain of regulation on activity, to use AI to improve productivity in their business operations is significant. Australian companies should not fear the rise of DeepSeek but use it to take AI seriously as a matter of urgency.

There will be winners and losers in the global AI race and it is those companies who see AI as some technology of the distant future who get left behind by their more nimble competitors.

The fact is, as Chinese-born Jun Bei Liu acknowledged in the discussion, there are now two technology streams emerging in the world – one led by the US and the other led by China.

All indications are that the technological “decoupling” which began a few years ago will, if anything, increase.

As she pointed out, global companies will not use data centres run by China or even in other countries for fear of security risks.

Australian companies are in the US tent. But the fact is the accelerated competitive environment in AI between the US and China will see the technology develop in leaps and bounds.

The learnings from how DeepSeek has been able to develop its AI much more cheaply will be studied in the US.

Interestingly, the world’s hunger for more information about DeepSeek has exploded at a time when the company and many other sectors of the Chinese economy are closed as Chinese celebrate the Lunar New Year.

Reporters who knocked on the door of the company’s headquarters in Hangzhou this week have been told the founder, 40-year-old Liang Wenfeng, was out of town.

Some critics are sceptical of its emergence, calling it “DeepFake” and questioning how many Nvidia chips it has been able to acquire.

Marina Zhang, associate professor and technology expert at the Australia China Relations Institute at Sydney’s UTS, says the global focus on DeepSeek has heightened ambitions in China for its technological capacity- despite US sanctions.

“In China, DeepSeek’s advances are being celebrated as a testament to the country’s growing technological prowess and self-reliance,” she says. “The company’s success is seen as a validation of China’s Innovation 2.0, a new era of homegrown technological leadership driven by a younger generation of entrepreneurs.

“The reaction in China is not just one of celebration, but also of heightened ambition.

“DeepSeek’s achievements have inspired other Chinese tech firms to pursue similar paths of innovation, emphasising foundational research and long-term technological advancement.”

Zhang predicts that the global attention to DeepSeek will encourage both the Chinese government and Chinese industry to step up their efforts to get around external challenges such as US restrictions, “further accelerating the country’s push for technological sovereignty.”

“Navigating US restrictions has fuelled a sense of patriotism and determination within DeepSeek’s team, as well as China’s tech ecosystems,” she says. “While Silicon Valley may view DeepSeek’s rise as a disruptive challenge, China sees it as a milestone in its journey toward becoming a global innovation leader.”

The question remains, of course, how much DeepSeek and its technological capacity can be integrated into the global AI sector. There are also many hurdles for Chinese private companies to navigate as they grow, including increased government attention.

But for corporate Australia the emergence of DeepSeek should not be regarded as a threat, but a wakeup call that the global AI race is accelerating, the economics of the technology are improving rapidly and there will be significant benefits and new business opportunities for those who can embrace its potential.