DeepSeek's Chinese New Year's Surprise: China Can Innovate
Happy New Year to Everyone!
"SHOCKED, AMAZED, ROUT, CRASH, SPUTNICK MOMENT"
These are examples of headlines and the general sentiment of the market following China's DeepSeek's revelation that it found a way to build a state-of-the-art LLM at roughly 1/50th the cost of US competitors using fewer older chips.
For the American side, which is justifiably proud of its AI advances, DeepSeek shows that the race for “AI Supremacy” is not as one-sided as it once believed.
This shocked markets, which did not welcome the idea that the race was more of a draw than a decisive win.
Still, what amazes me most is why pundits and markets are so surprised. In my view, DeepSeek's innovation was INEVITABLE!
Any fair-minded person monitoring China's AI progress shouldn't be surprised as China innovated within predictable constraints.
If you don't have the latest chips, find a way to build without them. Constraints are innovation's best friend!
Why the shock and awe?
The root cause of this shock and awe is that many continue to undervalue China's ability to innovate despite numerous examples over the years where it does.
For example, look at the West’s response to China’s hypersonic missiles, stealth fighters, and Huawei’s 7-nm mobile chips. In all cases, the media was “shocked” at the developments.
How long will it take before the West realizes that they continuously undervalue China’s innovation? The West shouldn’t be “shocked” when China brings breakthrough products to market. They should expect it, even if it means abandoning the hackneyed premise that “China can’t innovate.”
The entire chip war, for example, is predicated on China's inability to innovate and is an error of epic proportions. Even its chief architect, ex-Commerce Secretary Gina Raimondo, declared it a "fool's errand" in recent weeks.
Long-time readers may recall that I declared that the US was creating its worst nightmare, China, as a competitor at the start of the chip war. The nightmare has become a reality.
The US is losing the battle to dominate AI, and DeepSeek shows why. Whenever the US tries to paint China into a corner, it finds a way to prevail through innovation and hard work. At this point this pattern shouldn’t surprise anyone.
The king with no clothes
While this likely won't happen in the current tech cold war, we need US firms to collaborate with China to learn what DeepSeek did for the betterment of humanity. We cannot sacrifice the environment for AI's suggested infinite electric demands.
The idea that AI would require ever greater electricity consumption and chips is ludicrous, yet no one dared to say that AI's king, Sam Altman, had no clothes when begging for more of both.
Markets bought into this myth, as though more chips and electricity were the only way forward. DeepSeek showed that there is an alternative that is good for all humanity, no matter who came up with the idea.
Are we going to continue with this charade? Will people be shocked and amazed when China announces the next chip or innovation breakthrough? Will Nvidia's stock price tumble once again?
Enough of the bluster and competition; get over it, China innovates, and AI belongs to no single nation.
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