Washington targeted the wrong Chinese AI firms. One of the last acts of former president Joe Biden’s tech war was to blacklist more than two dozen chip and artificial intelligence companies from China, along with two from Singapore. They included Zhipu, China’s most prominent start-up in developing large language models (LLM) for AI.
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Unfortunately, DeepSeek wasn’t on the list. Now America’s tech warriors may have to add it to their Chinese “entity list” for posing a threat to US national security, however defined.
You can hardly blame them for the oversight, though. The Chinese AI upstart, which also specialises in LLM, was virtually unknown until a few weeks ago. Now, it has been blamed for causing a mini-crash on the Nasdaq, with the major chipmaking stocks suffering a double-digit rout on Monday. Nvidia, the darling of the AI-crazed investment crowd, lost a whopping 17 per cent in market capitalisation that day.
However, what DeepSeek exposes is not just the investment hype, but also the “China threat” inflation in the United States today. In the former case, the AI bubble has distorted the equities market in the US by taking AI-related company valuations to the stratosphere, thereby making those stocks highly volatile while disguising the moribund market for most other stocks.
The “threat inflation” of Chinese AI, which is part of the overall “China threat” narrative being sold by US pundits and politicians, has so warped their perceptions of reality that any tech advance or breakthrough from China is now seen in Washington as a challenge to the US.
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This is paranoid delusion, cold war-style, which presents a danger to its sufferer and to others as well. Consider the two types of chip ban that have been imposed and proved increasingly self-defeating. One restricts US companies and those from allies and partners from selling advanced chips and their services to China. The other establishes a hierarchy of foreign buyers by designating who can buy what types of chips from the US, with China, Russia and Iran being the most restricted.