Hello, how are you? I hope you're having a very good day. Today I want to talk about the implications that a simple software release can cause. A couple of days ago I posted about the new AI model from China, called deepseek. And how deepseek is better than the AI chatbot and reasoning models that we use on a daily basis like Claude from Anthropic and ChatGPT from OpenAI. Today I want to emphasize the geopolitical angles that this software release is bringing. For that we will need some context.
So this all started from Donald Trump's first term in office. When he imposed tariffs on Chinese products effectively starting a trade war with the Asian country. He also placed taxes on Chinese goods and put restrictions on what things can be exported to China and what not. Until that point, China was probably the biggest semiconductor in order from the USA. And they were happy doing it. But since Donald Trump put a ban on Huawei and the Chinese Tech industry on its entirety, China had no other option but to improvise and innovate, something which they didn't have to do until that point. Now here is a different thought. The Americans have always believed that China was behind America by a long shot. In terms of technology, China was behind by 2 to 3 years, which is a long time for technology to evolve. What's more funny is that tech CEOs from America even boasted about this. They took pride in China being handicapped by a few years more than them. Then during the Biden administration, usa started to export. Cut down versions of graphics cards and other AI accelerating parts, so that China can stay behind in the semiconductor and AI arms race. And now this “unknown company from China”, released a product with a fraction of The cost while maintaining the same level of position and ability, on the same day that Donald Trump assumes office for his second term.
This whole situation has started alarm bells ringing all across Silicon Valley. And the American lawmakers and CEOs are losing their minds. Trying to figure out how China caught up to them so fast. The USA will now probably double down on their restrictions towards China. This is what I think. This release is a slap on the face of the US president, while being a profound gift to the world as deepseek is completely open soon. There's something very poetic about it. From this point on, I believe that America will accelerate their own developments in artificial intelligence and they will seek explanations from tech companies to justify the enormous costs of running these models because China is doing them for way cheaper. And at the same time they will be scrambling to put more restrictions on China so that China can't get ahead of America now that they have matched them in at least the artificial intelligence side of things. But given they have matched the software, it is sure that they have the necessary amount of hardware to run it. So I believe China has enough hardware to actually take on the United States even with all these sanctions and tariffs and taxes and trade restrictions. And I'm not even getting into the tier based system that the US has introduced in terms of doing business with which countries are the safest. That is a separate rabbit hole. In simple terms, China has proved the world wrong and they are leading the AI space as of now.
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