In 1978, just months before China initiated the reform and opening up of its economy, Communist Party leader Deng Xiaoping told a meeting of researchers:
“Our science and technology have made enormous progress since the founding of New China…. But we must be clear-sighted and recognize that there is still an enormous gap between our level and that of the most advanced countries and that our scientific and technical forces are still too meager.”
If he were alive to witness the events of the last few days, would Deng be shocked?
The release of the DeepSeek-R1 chatbot, a Chinese-developed large language model (LLM), threw the global artificial intelligence industry into chaos and wiped a trillion dollars off the values of some of the biggest tech corporations on the New York Stock Exchange—overnight.
Is this China’s “Sputnik moment,” comparable in historic significance to the Soviet Union’s inauguration of the space age with the launch of the first artificial satellite in 1957?
Back then, U.S. capitalism made the mistake of assuming that blockading the socialist half of the world via trade walls and embargoes would keep it technologically backward forever. The same error is being made again with China.
No chips for China
Export bans on the most sophisticated microchips that power advanced AI applications, along with chip-making equipment and software, were imposed by the Biden administration in 2022, using “national security” as a justification.
With Trump campaigning last year to go even further, Biden toughened his restrictions in December. The graphics processing units (GPUs) that are the go-to for training AIs like ChatGPT and DeepSeek were put on an export blacklist, forbidden from being shipped to China or companies in third countries that do business with the People’s Republic.
But the U.S.’ economic aggression now appears to have backfired. The export bans simply spurred Chinese developers to get creative, pushing them to come up with cheaper and more efficient ways of using the older chips they already had access to.
They discovered means to train and operate AI models using less memory and less computing power. This resulted in a model that was cheaper to build and less damaging for the planet to operate than those developed by the U.S. tech monopolies.
DeepSeek-R1 was reportedly trained for just under $6 million, while U.S. AI companies have sunk billions of dollars into their models—hence the mass sell-off of chipmakers and LLM developers on the stock market.
Nvidia, the chip company that has been the biggest winner of the AI boom, raked in profits of $63 billion in just the last four quarters. Over the past two years, its stock price has exploded by more than 800%. But after DeepSeek-R1 was released, Nvidia lost almost a fifth of its value. Competitors Intel and Micro Devices saw similar plunges.
Collectively, Wall Street lost a trillion dollars—roughly equivalent to the Pentagon’s recent annual spending.
When it comes to environmental impact, ChatGPT—which relies on Nvidia chips—is estimated to consume enough electricity to power 21,000 U.S. homes for an entire year. That’s a lot of fossil fuels burned up and a lot of CO2 being released into the atmosphere by the electric stations generating the required juice.
Early analysis suggests that DeepSeek-R1, by contrast, uses 90% less energy per query, resulting in a 92% lower carbon footprint.
It all makes Trump’s $500 billion Stargate Initiative for AI companies and power plants, announced just before DeepSeek blew up the industry, look like a political misfire at best and a total waste of money at worst.
Another plus for the Chinese chatbot on the comparison ledger is that its developers made DeepSeek-R1 open-source. That means they showed their work for the world to see and adapt for further development. Other scientists and coders can build on DeepSeek-R1 to create their own AI models.
Contrast that to the instincts of the U.S. corporations, who want to guard their current and future profits behind intellectual property rights claims and permanent patents.
Liang Wenfeng, the founder of DeepSeek, is a hedge fund financier and capitalist—not too dissimilar in some respects from the tech bros who were at Trump’s inauguration. But he says monetization wasn’t the goal with his company’s AI chatbot:
“Our starting point is not the opportunity to make a quick profit, but rather to reach the technical frontier and drive the development of the entire ecosystem…. We believe that as the economy develops, China should gradually become a contributor instead of free-riding…. We’re done following, it’s time to lead.”
Closing the gap
Though it can be difficult for the uninitiated to parse the techno jargon of the AI world, the political takeaway is this: The time of U.S. monopolies’ unquestioned dominance of the high-tech economy is at an end. Gone too are the days when China’s science and technology could be considered “too meager.” The “enormous gap” that Deng referred to 47 years ago has been closed.
There remain other open questions, though. Technological advances in and of themselves do not have a class nature; the uses to which they are applied, however, most certainly do.
As Karl Marx argued in The German Ideology, where he outlined historical materialism, the science of society:
“It is only possible to achieve real liberation in the real world…by employing real means…. Slavery cannot be abolished without the steam engine and the mule and spinning jenny, serfdom cannot be abolished without improved agriculture. ‘Liberation’ is a historical and not a mental act, and it is brought about by historical conditions, the development of industry, commerce, agriculture….”
But just as the steam engine and the spinning jenny enabled society to develop and advance, they also became new tools for the exploitation of workers in the factories and mills of the Industrial Revolution.
Similarly, AI and other high-tech applications have the potential to revolutionize the production and distribution of knowledge and other commodities, but the benefits will all be privatized if these advances are not put to social use. If they are only employed as tools to eliminate jobs, lower wages, and worsen working conditions, then they will have become just the latest means of denigrating the value of labor and furthering the accumulation of profits for those at the top.
These are the bigger existential questions when it comes to AI, and they will have to be settled in the course of class and democratic struggle—in the U.S., China, and everywhere else. For now, though, we should recognize the historical importance of this moment.
AI arms race
DeepSeek has come under intense cyberattack, with many of the digital assaults reportedly originating in the United States. So harsh were the blows that new user registrations were halted for a time. They’ve now resumed, and DeepSeek is, as of this writing, the world’s number one most downloaded app.
Like Sputnik, DeepSeek-R1 will no doubt be surpassed by other technological developments in short order, but it will remain a symbol, a harbinger of a new historical period.
That little Soviet steel ball with antennas showcased socialism’s potential as it circled the planet in 1957. The example it showed—of a future beyond capitalism—set alarm bells ringing in the imperialist core. The space race against the Soviet Union became the stalking horse for a nuclear arms build-up and anti-communist proxy wars all over the developing world.
China’s chatbot, as a creation of the private sector, may not be imbued with the same ideological inspiration as Sputnik, but it too will no doubt set Washington in motion to protect the monopolistic desires of U.S. capitalism.
Trump said DeepSeek-R1 is a “wake-up call” for U.S. chipmakers and AI developers. They’ll rush to learn what they can from the Chinese experience and then re-package it to sell as their own. The chatbot will also be seen as a wake-up call by his administration, however, to intensify the economic war against China. It will be the excuse for throwing new hurdles in the way of the country’s development—tariffs, trade restrictions, export bans, and more.
America’s techno-capitalists only believe in free trade and open markets when they think there’s no chance of them losing out in the competition. The DeepSeek earthquake surely has them pondering the possibility they may lose. That’s why they will lobby Trump and Congress for all the protectionist help they can get.
Likewise, we can expect a ramping up of military tensions over the long term. The weapons dealers and neocon warhawks will seize the moment to beat the drums of a real war against China. There will be a tightening of U.S. imperialism’s military encirclement of China, and a propaganda onslaught warning of the “China threat” will wash over the American people. Anti-Asian racism will figure prominently, just as it did during the pandemic.
The first Cold War denied humanity the scientific and technological benefits that might have come if scientists from the capitalist and socialist blocs had been allowed to communicate and collaborate. It also wasted trillions of dollars on weapons of mass destruction and wars.
It doesn’t have to be that way this time around.
People’s World downloaded DeepSeek-R1 and asked it about China’s approach to international cooperation in science and technology. The app spit back this answer: “The Chinese government, under the leadership of the Communist Party of China, steadfastly adheres…to the principles of mutual benefit and shared development…contributing to the global advancement of science and technology for the benefit of all humankind.”
Peaceful coexistence and international cooperation between countries with different social systems continue to be the guideposts of Chinese foreign policy, just as they have been for decades. But Washington’s new Cold War stands in the way of such a future, and it’s up to the people to push back.
The tech monopolists will do anything to protect their own profits and power, even if it means keeping the world divided and holding back shared progress.
But then, hasn’t that always been capitalism’s M.O.?
As with all news analysis and op-ed articles published by People’s World, this article reflects the views of its author.
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