Deep end: Chinese AI chatbot disrupts global big tech

Labor has signalled potential national security issues with Chinese artificial intelligence app DeepSeek amid fears the US’s AI dominance could be under threat.

Chinese AI app DeepSeek triggered a tech stock bloodbath on Wall St. Picture: AFP

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Labor has signalled potential ­national security threats linked to Chinese artificial intelligence app DeepSeek as the breakthrough software triggered a sharemarket bloodbath amid fears the US’s AI dominance could be under threat.

Donald Trump said the AI disruptor – apparently developed with a fraction of the computing power of US ­rivals – was a “wake-up call” for American technology companies, which needed to be “laser-­focused” on winning the AI race. As Western tech stocks plunged, security experts warned Chinese AI developments could hand Beijing a military advantage and should be subject to strict regulatory controls.

Science Minister Ed Husic said there would “naturally” be concerns that arose around the software for users in Australia, and the government would take ­advice from national security agencies on potential threats linked to the Chinese app. “I think there’ll be parallels to what you’ve seen in the discussion around TikTok that emerge around DeepSeek as well,” he said.

Mr Husic said the government was open-minded on the prospect that national security restrictions could be imposed on DeepSeek, like those applied to Chinese telcos such as Huawei, but it was “too early to make that call”.

“We’ll clearly be informed by the advice of the national intelligence community in relation to threats as they might present at different points in time. How do we respond? How do we shape up that response? We’ll take that on board and deal with it then,” Mr Husic said. The Chinese large language model, which is competitive with US AI offerings but said to have been developed with less-advanced chips, wiped $US1 trillion ($1.6 trillion) off Wall Street stocks on Monday (Tuesday AEDT), sending shockwaves through global markets.

Science and Industry Minister Ed Husic. Picture: NewsWire / Martin Ollman

Leading semiconductor firm Nvidia, whose chips were thought to be the bedrock of US AI leadership, plunged 16 per cent, or $US593bn, as the S&P 500’s technology sector lost 5.6 per cent – its worst one-day decline in more than four years.

Australian tech stocks also spiralled sharply, some by as much as 20 per cent.

Mr Trump, who launched his $US600bn AI Stargate plan only last week, said the Chinese app could be a positive development, allowing AI companies to slash the cost of developing new ­software.

But he warned the development presented a fresh challenge to US tech firms.

“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, because we have the greatest ­scientists in the world,” Mr Trump said.

The AI upheaval comes as ­Chinese-owned TikTok, which is banned from Australian government devices on national security grounds, faces prohibition in the US unless it is sold to an American buyer.

DeepSeek founder Liang Wenfeng, right, speaks at a symposium attended by Chinese Premier Li Qiang. Picture: CCTV

DeepSeek, the brainchild of Chinese technologist and hedge-fund boss Liang Wenfeng, has become Apple’s most downloaded app in the US following the ­release of its latest R1 model last week. But the company said it was forced to limit downloads after a cyberattack, which also disrupted its website. The app’s popularity, and the company’s apparent technological leap, sparked warnings over the dangers of Chinese-controlled AI.

Tech investor and Trump ally Marc Andreessen declared “DeepSeek R1 is AI’s Sputnik moment”, referencing the 1957 launch of Earth’s first artificial satellite by the Soviet Union that stunned the Western world.

But Australian Strategic Policy Institute executive director Justin Bassi said the AI development presented an even more profound challenge to the West than ­Sputnik.

“It’s even worse, as we were never reliant on the Soviet economy or its technology in the way we are with China,” he said.

“We now face the prospect of being dominated in almost every field of life from the cars we drive to the news we get from social media to the so-called facts Beijing decides to give us through AI models. Both western governments and companies acted after Sputnik – that action is required once again.”

Former Home Affairs secretary Michael Pezzullo said China’s AI software “should be the subject of stringent technology controls and barriers”.

“All AI research and development has dual civilian and military use, and its widespread and effective application by China in the military sphere could give the People’s Liberation Army a significant combat edge just as geopolitical tensions will see the probability of confrontation and even conflict rise over the next four to five years,” he said.

The US had sought to curb Chinese AI advances by restricting the sale of its most advanced chips, but DeepSeek appeared to have overcome the handicap with innovative software engineering. The company said its V3 model, released in December, was trained for just US$5.6m (A$9m), compared to hundreds of millions for US AI software. But the claim has been questioned in the US.

Elon Musk said the Chinese company “obviously” had more advanced Nvidia chips than claimed.

“But on a go forward basis, they are going to be limited by the chip controls and the export controls that we have in place,” the Trump confidant said.

Sam Altman, the CEO of ChatGPT developer OpenAI, welcomed the competition, saying DeepSeek’s R1 version was “an impressive model, particularly around what they’re able to deliver for the price”.

One of the early criticisms of DeepSeek by Western users has been its censorship of information deemed unacceptable to the Chinese Communist Party, including details of the 1989 Tiananmen Square massacre and human rights abuses in Xinjiang.

Mr Husic said consumer trust would be an issue with the app, but some would still “vote with their feet” and use it.

He added it was too early to declare China had overtaken the US in the AI race.

“I don’t think the US has any intention of giving up its lead by virtue of the Stargate announcement that was made just in the last few days, which builds on top of everything else that’s happening over there,” he said.

Australia’s new Chief Scientist Tony Haymet said the Chinese ChatGPT competitor “is genuine, and is really going to change our lives”.

“It shows you the pace at which innovation and science and technology goes,” he said. “Privately funded in Shanghai, a bunch of talented 22-year-olds without access to the world’s best chips … seem to have created something that’s even better than the best companies in the Western World have done. It shows you how disruptive technology can be and how quickly things can happen.”

Australian AI expert Toby Walsh said the DeepSeek inspired tech sell-off was “bad news” for investors but good news “for the rest of us” as “the AI race isn’t going to necessarily be won by those tech billionaires”.

“It shows that it doesn’t necessarily take the deepest pockets and that the export controls on Nvidia’s chips haven’t stopped AI technology from being picked up and developed by other players,” he said.

AustralianSuper chief executive Paul Schroder was similarly optimistic, describing the market correction as a “mid-cycle efficiency gain”.

“What we’ve seen overnight and in recent days is what we think is most likely a mid-cycle efficiency gain; that is, somebody’s come along and said we can do that much more cheaply,” he said.