AI now not just a contest between Californian tech bros with macho budgets, but between superpowers

27 January 2025, 23:55 | Updated: 28 January 2025, 18:21

How smart is AI these days? Not smart enough, it seems, to spot a Chinese competitor coming apparently from nowhere.

AI assistant DeepSeek was developed in China by hedge fund entrepreneur Liang Wengfeng as a side project, intended, he says, only for research.

Its latest iteration, which appeared on Apple's app store and Google Play a week ago, has demonstrated capabilities apparently equal to its better known, and apparently far more costly rivals, led by ChatGPT, owned by OpenAI.

In a research paper published last year, DeepSeek said it had been developed using only "limited capability" Nvidia chips - the most advanced technology has been banned from China under export controls since 2022 - and had cost a mere $5.6m (£4.5m) to develop.

Its success appears to pose a fundamental challenge to the received wisdom that the development of AI will require huge investment, vast computing power housed in energy-hungry data centres, and be a race run and won in America.

Last week Donald Trump heralded a £500bn investment project, including $100bn from OpenAI. Google, Meta, Microsoft and the ubiquitous Elon Musk are all in the race, desperate to be first to find the holy grail of artificial general intelligence - a theoretical concept that describes a machine's ability to learn and understand any intellectual task that a human can.

That now looks like a contest not just between Californian tech bros with macho budgets, but between superpowers.

The implications were clear on US stock markets. The tech-heavy Nasdaq index was down 3%, a loss of a trillion dollars, and Nvidia itself fell almost 17%, shedding $600bn (£482bn) from its market value and losing its status as the world's biggest company in the process. Google's parent company fell in value by £100bn and Microsoft, which has a stake in the privately held OpenAI, was down £7bn.

As well as questions about the cost and capability of US models, those losses also demonstrate investor desperation to be on the right side of perhaps the most important 'general technology' since electricity. It seems certain AI will change the world, but no-one can yet say with certainty precisely how, when or in what way.

There is much about DeepSeek we do not yet know. How reliable, for example, is that development figure?

And while established US models are capable of "hallucinations", in which they make things up, DeepSeek appears to have selective memory. Ask it about Tiananmen Square, or other issues and events blocked in China, and it cannot help.

That speaks to wider concerns about the role of Chinese technology that has seen US authorities seek to ban TikTok, and the UK government strip Huawei tech from the communication network.

For now however users around the world seem relaxed; DeepSeek is the most downloaded app on the Apple store this week.

(c) Sky News 2025: AI now not just a contest between Californian tech bros with macho budgets, but between superpowers