DeepSeek is a modern ‘Sputnik’ moment for West
The release of China’s latest DeepSeek artificial intelligence model is a strategic and geopolitical shock as much as it is a shock to stockmarkets around the world.
This is a field into which US investors have been pumping hundreds of billions of dollars, and which many commentators predicted would be led by Silicon Valley for the foreseeable future.
First, the West’s clearest strategic rival is a genuine peer competitor in the technologies that will decide who dominates the century and, second, we need to step up our efforts to become less not more reliant on Chinese technology.
More than any other single field, AI will unleash powerful forces from economic productivity through to military capabilities. As Vladimir Putin said in 2017, whoever leads in AI “will become the ruler of the world”.
Marc Andreessen, the influential Silicon Valley entrepreneur and venture capitalist, called the DeepSeek announcement a “Sputnik moment” and “one of the most amazing and impressive breakthroughs” in AI. The US was shocked into action by the Soviet satellite, Sputnik, investing billions into a public-private sector partnership model that helped win back and sustain tech dominance that would play a major role in winning the Cold War.
Andreessen is right but, in many ways, this breakthrough is even more consequential than Sputnik because the world’s consumers are increasingly reliant on China’s technology and economy in ways we never were with the Soviets.
So what does the West need to do now? Above all we need to stop underestimating our major strategic competitor. If hundreds of billions of dollars isn’t enough investment, we either need to redouble our efforts or work more smartly, bringing governments and the private sector together, and working across trusted nations, as we’re doing with AUKUS security technologies – one of which is of course AI.
We also need to dramatically step up so-called derisking of our economies with China’s in these critical technology fields.
When our leaders say they want us to have consumer choice including Chinese-made tech products, they are ignoring the considerable risks of future Chinese dominance, given we have seen the way Beijing is prepared to use its economic power for strategic purposes, whether through 5G or critical minerals.
As it stands, Beijing will have control over the majority of our smart cars, our batteries, the news our public gets through social media and, if models such as the open-source DeepSeek are adopted cheaply by Western companies, the supercharging power that AI will bring to every other sector.
DeepSeek’s breakthrough should actually come as less of a surprise than the stunned market reaction has shown.
In 2015, China told the world its aim was to supplant the US as the global tech superpower in its “Made in China 2025” plan.
At the Australian Strategic Policy Institute (ASPI) our research in our Critical Technology Tracker has been showing for almost two years that Chinese published research is nipping at American heels.
It surely isn’t a coincidence that at the end of 2024 and the early weeks of 2025, Beijing has shown the world its advances in both military capability in the form of new combat aircraft, and now dual-use technology in AI. Simultaneously we see Beijing’s obsession with keeping Americans and all Westerners hooked on TikTok, which ensures its users see a Beijing-curated version of the world.
Some observers are arguing that the DeepSeek announcement shows the ineffectiveness of US restrictions on exports of advanced technology such as Nvidia’s advanced chips to China.
Far from backing away from such protective measures, the Trump administration should consider stepping them up, along with further investments in data centres – already under way through the Stargate project.
Restricting chips to China is still an important tool in the American toolkit – it’s just not a panacea.
As Donald Trump’s reportedly incoming tech security director, David Feith, argued last year, the US should also target older chips because “failing to do so would signal that US talk of derisking and supply chain resilience still far outpaces policy reality”.
It’s not certain how much direct support DeepSeek and its backers have received from the Chinese government but there are some clues in the way the company is behaving. The DeepSeek model is open-source and costs 30 times less for companies to integrate into than US competitors.
Founder Liang Wenfeng has been blunt that the company is not looking for profits from its AI research, at least in the short term – which would enable it to follow the Chinese playbook of undercutting competitors to create monopolies. And the firm had reportedly been stockpiling the most advanced Nvidia chips before the US restrictions, and has received allocations of chips apparently through the Chinese government.
These facts hint at the lopsided playing field China likes to create. As Edouard Harris, of Gladstone AI, told Time magazine: “There’s a good chance that DeepSeek and many of the other big Chinese companies are being supported by the (Chinese) government, in more than just a monetary way.”
While the West continues to debate the balance between fully open economies and national industrial and technology strategies with greater government involvement, China has already fused its industry with its government-led national strategy and is evidently stronger for it.
China sees the West’s open economies as a vulnerability through which it has an easy access to our markets that is not reciprocated.
DeepSeek is yet another reminder that China’s technology is a force to be reckoned with and one that its government will use strategically to make China more self-sufficient while making the rest of the world more dependent on China.
We must start recognising this era and responding decisively.
Justin Bassi is executive director and David Wroe is a director at the Australian Strategic Policy Institute (ASPI).
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