The Consequences of Being Left Behind

For many in China, the phrase "being left behind means getting hit" resonates deeply. This expression encapsulates a mindset that balances comfort with vigilance, reflecting an urgent drive within China to compete on a global scale, particularly in the realm of technology. Over the past two decades, the perception among most Chinese regarding the nation’s technological advancements has remained relatively static. Many believe that China’s achievements are primarily due to its expansive industrial system, with a significant gap in quality compared to developed nations like the United States. However, as we approach 2025, a series of developments may suggest that the so-called technological prowess of the US is not quite as formidable in the face of industrious Chinese innovation.

The US Seeks to Suppress China

In recent years, the geopolitical landscape in the Asia-Pacific region has shifted, particularly under the leadership of a democratically elected president in the United States. While his governing approach has been balanced, it has inadvertently escalated tensions with China, fostering military alliances with countries like Japan and South Korea.

The Power of AI Relies on Computing Graphics

In the technology sector, the US government’s strategy can be described as operating behind high walls, intervening in market activities through legislative measures. This includes pressuring semiconductor companies such as NVIDIA and AMD to compromise by selling "restricted" versions of their chips to China, thus positioning the US favorably in the ongoing tech battle.

The US government perceives the heart of its competition with China to lie within the high-value semiconductor industry. This focus is intended to leverage advanced computing power to develop hardware-based AI models, which could ultimately catalyze a global technological revolution. The ambition here is considerable and hints at the potential for a fourth industrial revolution. However, operating within the parameters set by the U.S., China finds itself unable not only to procure high-performance chips but also to produce advanced chips independently. This inherent disadvantage could render even China’s massive middle and low-end industries helpless in the face of the technological “nuclear bomb” that chips represent, severely limiting its ability to compete in the AI arena.

Moreover, the US government’s restrictions on Chinese chips could serve as a powerful tool in their strategic arsenal, as the US possesses absolute "computing power hegemony." In this sense, China will find itself limited to its own resources, creating a strangling effect on its tech sector.

China’s Counteroffensive

However, to the surprise of the American government, China has countered in a remarkably unexpected manner, delivering what can only be described as a "Chinese shock." Recently, a Chinese quantitative trading company, known as Huansheng, unveiled its own AI language model that has sent shockwaves through the global tech community. Unlike its American counterpart, OpenAI, Huansheng managed to reduce the training costs associated with AI development to a mere $5.5 million, effectively stripping away the mystique that often surrounds cutting-edge AI technology.

DeepSeek Lowered Cost of Input Millions of Times

On a usage-cost basis, Huansheng’s DeepSeekR1 manages to operate at just 3% to 5% of the costs associated with similar American technologies.

After several validation phases, the American tech stock market faced a seismic shift. NVIDIA, a company heavily reliant on graphics card sales, saw its stock drop by 17%, resulting in a staggering evaporation of $2 trillion in market value. Even indices representing the progression of the U.S. economy, such as Nasdaq and Dow Jones, experienced significant falls, illustrating the considerable impact of China's AI model.

Just as Americans began to dismiss the recent advances by China in AI technology as a mere "fashionable trend," Huansheng unveiled a new image-generating language model known as Janu-pro, which again outperformed Western alternatives in various tests, leading to yet another tremor in the U.S. stock market.

The Dramatic Collapse of the U.S. Stock Market

Perhaps most amusingly, Huansheng’s AI subsidiary, DeepSeek, is a mere startup established in 2023, boasting just 167 employees. Meanwhile, Huansheng itself is not even a traditional tech firm; instead, it specializes in quantitative trading. Originally, their motivation for developing AI models was simply to enhance their own trading efficiency.

In essence, this indicates that non-expert entrants from China have managed to create AI solutions that outperform their Western counterparts at a fraction of the typical training and operational costs.

Upon further examination of DeepSeek's underlying model code, analysts discovered that the computational requirements for this language model are surprisingly modest, making it possible to deploy a streamlined version on lower-end computers. This has effectively democratized AI technology, stripping away its pretense of exclusivity.

Is the U.S. Hegemony Nearing Its End?

From the perspective of game theory, the ongoing rivalry between China and the United States is marked by a long-term struggle. The recent shockwave brought by China in the field of AI may symbolize a convergence point in the comparative strengths of the two nations. The next four years will prove critical, as the forthcoming strategies of both sides will determine whether their respective growth trajectories bend upwards or downwards.

However, a key difference remains in the United States’ approach to AI. This can primarily be attributed to its urgent need for a new economic growth engine. The longstanding issue of industrial hollowing has significantly weakened American manufacturing and compromised its foundational capacity to meet even basic wartime demands, let alone engage in head-on competition with China in the global market.

AI Technology as a Guiding Light for Human Development

Consequently, the U.S. has shifted its focus to AI, previously channeling trillions of dollars under the last administration with the goal of achieving complete dominance over both the software and hardware essential for future AI developments. This strategy mimics America's earlier claim to "absolute authority" in the field of computer development during the information technology revolution. Yet this time around, there are signs of considerable miscalculation.

As if that were not enough, escalating issues surrounding national debt have diminished the room for error in new technological domains. The $10 trillion investment from the previous administration only translated to $7 trillion in GDP, prompting the current government to likely adopt an even more aggressive investment strategy. Following rounds of ineffective endeavors, it is feared that American national strength may, contrary to expectations, be in decline rather than on the upswing. From China's vantage point, amidst a set of favorable conditions, the potential for desperate measures from the U.S. should be closely monitored.