Post 9: Implications of DeepSeek on Creative Insecurity

I am going to take a break from emerging market growth predictions to discuss some implications of DeepSeek, the new Chinese generative AI model. I believe that DeepSeek is a game changer from both a technological and a geopolitical perspective. This warrants a discussion on its implications to creative insecurity and my predictions for future economic growth.

DeepSeek is significant because it offers very similar functionality as other generative AIs like Chat GPT or Gemini, but at a fraction of the cost. Previous AI models required an enormous amount of calculations to both train and run. These required using many state of the art computer chips, which are expensive, difficult to obtain, and use huge amounts of energy. As a result, generative AI models like Chat GPT or Gemini could previously only be developed by well funded technology companies like Microsoft or Google. China was explicitly excluded by export restrictions that prevented them from obtaining most of these cutting edge computer chips.

DeepSeek was able to find a number of efficiencies, which allow build a generative AI model with older computer chips, at a fraction of the time and costs. Now anyone can develop their own generative AI model, and China jumped from being excluded from the latest AI technology to becoming a leader.

How does this impact creative insecurity? First, it increases creative insecurity of China’s neighbors. They may have been confident that their US-based alliance of democracies was safely ahead of China. Not anymore. China’s neighbors will feel extra pressure to keep up. This should reinforce my prediction from my last post, that Asia will become a place of competing great powers, and a hub of global innovation and economic development.

Second, it is too early to tell, but this has the potential to be a Sputnik moment for the United States. After the Soviet Union launched the first man-made satellite into space in 1957, Americans feared that the Soviets would establish dominance in space and technology more broadly. This fear pushed the United States to invest heavily in science generally and space exploration more specifically. I had previously predicted that the US could rest on its laurels and become more of a venture capitalist than an innovator. Now, I am less sure. It depends on how the United States reacts to DeepSeek and other Chinese advancements in AI. I would look for the following signs over the next few months. Do Chinese technological advancements continue to receive US press coverage? Are there bold initiatives to boost US competitiveness in key technologies? Are there government sponsored initiatives to both invest in AI technology directly and to fund basic research and education?

So far, a consortium of US and US allied companies announced the Stargate project at the White House with President Trump. Stargate is a a joint venture between various technology companies to develop AI infrastructure in the United States with a goal of investing five hundred billion dollars in AI technology by 2029. It is hard for me to tell if the Stargate project is the result of the United States experiencing creative insecurity, or specific large technology companies experiencing creative insecurity. These technology firms invested billions of dollars in generative AI, and do not want to be outcompeted by Chinese startups. Stargate was announced at the White House with President Trump, but I am not aware of the US Government offering more than moral support. That said, the fact that the President was involved at all is significant. We will see how this develops over the next few months.

I find it interesting that one of the initial equity founders of Stargate is SoftBank, a Japanese technology and investment firm. SoftBank will be one of two lead partners and will have primary financial responsibility. SoftBank’s founder and CEO Masayoshi Son will serve as Stargate’s chairman. To me, this is confirmatory of Japan’s interest in building its technological and innovative capabilities out of necessity from creative insecurity.