GUEST BLOG: Seeby Woodhouse – Chinese AI Revolution Sparks Chaos
In Auckland, New Zealand we had a three day weekend, and honestly I’ve just been glued to my phone the whole time, watching global turmoil unfold in the tech scene and financial markets caused by the release of “Deepseek R1”, a Chinese A.I. to rival Chat GPT.
It was only a few days ago that I sent out my last “Rumination”, about the release of Operator, the intelligent agent from Open AI, however now I feel compelled to provide another blog post on A.I – such is the speed at which things are moving.
For those confused why the US state and Silicon Valley are having a meltdown:
China released multiple Al models that are 50x more efficient than the best American Al models and made them open source, ruining the American “for profit” Al market
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“With the release of R1, DeepSeek essentially cracked one of the holy grails of Al: getting models to reason step-by-step without relying on massive supervised datasets. Their DeepSeek-R1-Zero experiment showed something remarkable: using pure reinforcement learning with carefully crafted reward functions, they managed to get A.I. models to develop sophisticated reasoning capabilities completely autonomously. This wasn’t just about solving problems— the model organically learned to generate long chains of thought, self-verify its work, and allocate more computation time to harder problems
The technical breakthrough here was their novel approach to reward modeling. Rather than using complex neural reward models that can lead to”reward hacking” (where the model finds bogus ways to boost their rewards that don’t actually lead to better real-world model performance), they developed a clever rule-based system that combines accuracy rewards (verifying final answers) with format rewards (encouraging structured thinking). This simpler approach turned out to be more robust and scalable than the process-based reward models that others have tried.”
Deepseek erases $1.2Trillion of US stocks
Over a trillion dollars in market value has been wiped off U.S. companies in the last 7 days, as the ripple effects of the implications of Deepseek’stechnology cascade through the tech sector.
Industry giants like Nvidia, who have long been at the forefront of providing hardware solutions for AI development, have seen their share prices plummet.
Nvidia experienced a significant dip as investors scramble to assess the implications of a technology that dramatically reduces the cost of AI operations, perhaps by a hundred fold, and reduce the need for the most expensive A.I. chips. Deepseek R1 is capable of running on a desktop computer.
The rapid devaluation of tech stocks has left analysts questioning whether this marks the beginning of a broader market correction or a pivotal shift in the AI landscape.
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Project Stargate
Project Stargate was announced by President Donald Trump on January 21, 2025. This expensive $500 Billion initiative is a collaboration between OpenAI, led by CEO Sam Altman, SoftBank Group, and Oracle Corporation. The project’s primary goal is to invest in artificial intelligence (AI) infrastructure across the United States.
Project startage now looks ridiculous when Deep seek R1 was trained for just $5.5Million USD. China has released something Open source at 1% the cost of America’s “pay for it” model.
It truly shows what insane times we are living in when the US can announce a $500 billion dollar investment in A.I, and in less than a week that looks outdated. To say that things are moving at light speed would be an understatement. And let’s not forget that once A.I. is as good at improving itself as humans are, A.I. may simply improve itself virtually instantly to a level that we can’t understand with human level intelligence.
What Makes Deepseek Different?
Deepseek has captured global attention for several reasons:
- Open Source Accessibility: Unlike many proprietary AI models, Deepseek has been released as open-source software. This move has democratized access to cutting-edge AI technology, allowing developers, researchers, and businesses to integrate and build upon its capabilities without the heavy licensing fees often associated with such tools.
- Unprecedented Cost Efficiency: Deepseek is remarkably cheaper to run than its closest competitor, ChatGPT. Early reports suggest that the cost of operating Deepseek is only a fraction of what similar models require, making high-powered AI applications more accessible to smaller organizations and startups.
- Lower Training Costs: One of the most astonishing aspects of Deepseek is how much less expensive it was to train compared to other large language models. Leveraging optimized architectures and innovative training methods, Deepseek’s creators achieved a level of performance that rivals the best in the industry, at a fraction of the cost. This efficiency has triggered a reevaluation of the financial assumptions underpinning the AI sector. By being extremely close to the hardware and by layering together a handful of distinct, very clever optimizations, DeepSeek was able to train these incredible models using GPUs in a dramatically more efficient way. By some measurements, over ~45x more efficiently than other leading-edge models. DeepSeek claims that the complete cost to train DeepSeek-V3 was just over $5m. That is absolutely nothing by the standards of OpenAl, Anthropic, etc., which were well into the $100m+ level for training costs for a single model as early as 2024.
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Why This Matters
Deepseek’s release signals more than just a new player in the AI space; it represents a fundamental shift in how AI systems are developed, deployed, and monetized. Here’s why it’s such big news:
- Eroding Competitive Advantages: Companies like OpenAI, which have relied on proprietary models and premium pricing strategies, now face the challenge of competing with a model that is not only cheaper but also openly accessible and free to download.
- Leveling the Playing Field: By lowering costs and eliminating access barriers, Deepseek empowers a broader range of entities to leverage AI. This democratization could lead to an explosion of innovation, as smaller players enter a field previously dominated by tech giants.
- Disrupting the Hardware Market: Deepseek’s efficiency threatens the dominance of hardware providers like Nvidia, whose high-performance GPUs have been a cornerstone of AI development. If more efficient models reduce the demand for expensive hardware, the entire ecosystem could shift. I have already seen demos of Deepseek running locally on an iPhone 16
Deepseek is still the People’s republic of China
Out of interest, I asked Deepseek about Tiananmen Square, and no surprises, it wouldn’t give me an answer. Interestingly, it did give me an answer, which flashed on the screen for a second, and was then removed.
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Also, bear in mind that when you deal with US companies (Facebook, etc, they are using and stealing all your data (if you’re not paying for something, you’re not the customer, you’re the product being sold). And the same is true for Chinese companies (Tik Tok, Deepseek etc).
The beautiful thing about Deepseek R1 is that being open source, I assume that I can download it, and then remove any Chinese filtering if I have the skills. And if not, Deepseek has shown coders the way to build their own AI’s without filtering in the future.
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What Comes Next?
The release of Deepseek has undoubtedly reshaped the AI landscape, but the full implications are yet to unfold. While some celebrate its democratizing potential, others warn of the destabilizing effects it could have on established players. Regulators, investors, and industry leaders are now grappling with the question of how to adapt to this new reality.
One thing is certain: the AI revolution is far from over, and the chaos sparked by Deepseek may only be the beginning. As innovation accelerates and market dynamics shift, the next few months will be critical in determining the future trajectory of artificial intelligence.
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Seeby Woodhouse is a NZ tech entrepreneur, CEO of Voyager and posts on Substack.
Shows quite clearly the American problem they’ve had for a while – trying to resolve the problem by throwing more horsepower at it, rather than finding a more efficient methodology. American AI is like the old V8 muscle car – big heavy and with massive power to get it moving quickly. The Chinese model is like the smaller turbocharged 4 cylinder – same power, less requirement for gas.
I know, crude analogy, but somehow fitting. The Chinese are smart – watch this happen more and more. I hope they release a whole bunch of game and paradigm changing software under open source.
Fascinating. I’ve seen opinion that AI from the big tech corps in USA was focused upon gaining uncompetitive market advantage and becoming more powerful than the state itself. If so nice try, pipped at the post by China.
Its almost like China actually believes in a multi-polar world, first BRICS+ and now this… unless its all a nefarious plan to destabilize “Mericas stranglehold on the planets financial systems.
DeepSeek has some very real problems. It has Chinese government safeguards built in, to the point where it will refuse to criticize even well known CIA/NED agents like Anne-Marie Brady because the Chinese government has a policy of being nice to everyone. If you want to use it for research into how hostile American agents like Brady subvert NZ you need to download a local copy and start adding in ‘prefix’ prompts to strip out the friendliness.
What a commentary on the irrationality and immorality of the capitalist system that a technological advance that could benefit all of humanity made in one part of the world is greeted in other parts of the world with dismay and consternation
Terry C What a naive person you are. Best to talk over the back fenc4e if you consider AI is going to benefit everybody or – in the long run anybody.
It doesnt like talking about the Cultural Revolution either….
True but there is a lot of topics that are sensitive to the Chinese.
First you have to understand Chinese way of life, take Rednote for example and its terms of use.
No posting violence, no politics and no sexual contact or monetized ads, Americans are flocking to it after the Tik Tok debacle and loving it, compare that to Facebook and other western trash and I’m in.
Already the panicked western media have received their instructions to do damage control and Chinese censorship is their method of attack, Americans are shocked about how they are lied to by their government.
Its interesting so here’s a question, Would you rather be on a app where you are not exposed to violence and are censored with information you can easily find elsewhere, or a Western based app where you are a source of income and depravity?
LOL @ ‘Chinese way of life’. What, they are all Confuscian monks over there?
For what its worth, nothing wrong with a bit of competition in the AI sphere. Having both ChatGPT and DeepSeek in the market is better than just ChatGPT.
Nothing artificial about a program constructed and limited by human programming Just another marketing ruse to me. And now China has made a cheap n easy version for the world. Fine by me.
It’s a pretty simple problem. Chinese people can innovate. The deranged mass that roams the s**thole Murican economic zone cannot.
I’ve been following the news about Deepseek R1 as well, and it’s crazy how fast things escalated. The financial market’s response is a wake-up call for anyone thinking AI disruption is still years away.
According to Robert Reich – and he should know – very large American have become sluggish and lazy. There was a time when these monopolies were broken up wasn’t there?
It’s crazy to think how the launch of one AI model can cause this kind of market shakeup. Will this be a wake-up call for other countries to step up their AI game?
yawn – waving not drowning – check out The Dor Brothers AI generated CGI
Don’t be fooled on why it’s so cheap, behind the scenes it’s secretly run by a hamster randomly spinning a wheel for answers.
The rapid impact of Deepseek R1 on global markets is a stark reminder of how AI innovation is now deeply intertwined with economic power. It raises big questions about the future balance of technological leadership—will regulatory responses keep pace, or are we looking at a new era of AI-driven economic disruption? Looking forward to seeing how companies and governments react in the coming weeks.
It’s fascinating to see how quickly Deepseek R1 has stirred the pot in the tech world. I wonder if this will prompt the U.S. to speed up its own AI development to maintain its competitive edge, or if it will lead to new global regulations on AI?
The rapid impact of Deepseek R1 on global markets is a clear sign of how AI dominance is shifting. It raises big questions about the balance of power in tech and whether the West is prepared for such disruption. Do you think governments will step in with regulations, or is this a wake-up call for companies to innovate faster?
Deepseek R1 seems like a real game-changer. Do you think the rapid reaction in financial markets reflects a long-term trend, or is this more of a knee-jerk reaction?
It’s fascinating to see how fast things are moving with AI—just a few months ago, it felt like ChatGPT was the biggest thing in tech. Now, Deepseek R1 has completely upended the balance. I’m curious to know how governments will start regulating these developments to prevent future market shocks.
The rapid impact of Deepseek R1 on global markets really highlights how AI competition is shifting power dynamics overnight. It’s fascinating (and a little unsettling) to see how quickly a new player can wipe out a trillion dollars in value. The big question now is whether Western AI firms can keep up—or if we’re witnessing a fundamental shift in tech leadership.
The trillion-dollar loss is shocking, and it really underscores how vulnerable the market is to technological innovation. With AI advancing so rapidly, it raises the question of whether this kind of volatility will become the norm as more players enter the race. What do you think—are we just seeing the tip of the iceberg?
Incredible how quickly a new AI model can stir such massive disruption in the financial world. It seems like China’s tech dominance is just beginning, and the ripple effects are being felt globally. What do you think the U.S. will do to respond to this challenge?
I’m really curious about the long-term implications of this chaos. While the short-term fallout is undeniable, could this disruption actually spur faster innovation across the tech world? Sometimes, it feels like these big shocks push industries to evolve faster than we expect.
The rapid impact of Deepseek R1 on U.S. markets highlights just how quickly AI advancements can disrupt global industries. It also raises big questions about whether Western tech companies can maintain their lead—or if we’re entering a new era of AI dominance from China. Curious to hear others’ thoughts on how regulators might respond to this shift!
I’m curious about the long-term implications of Deepseek R1 for U.S.-China relations in the tech space. If Chinese AI continues to disrupt like this, it could lead to a complete reshuffling of the global tech landscape.
The rapid decline in value is pretty mind-blowing. Do you think this is just a short-term shock, or are we seeing the beginning of a longer-term shift in the AI landscape, with China gaining more ground?
The rapid impact of Deepseek R1 on global markets really highlights how AI is becoming a geopolitical force, not just a technological one. It makes you wonder—are Western companies truly prepared for this level of disruption, or is this just the beginning of a major power shift in AI dominance? Either way, it’s clear that the AI race is now an economic battleground as much as a technological one.
The impact of Deepseek R1 really shows how much power AI holds, not just in tech, but also in financial markets. It’s a wake-up call that the race for AI supremacy is about more than just innovation—there are serious financial stakes too.
I think you’re absolutely right about the chaos caused by Deepseek R1. What caught my attention is the speed at which these technologies are advancing. It almost feels like we’re in a race where no one really knows who will finish first. How do you see this affecting smaller tech companies who can’t compete with the likes of Deepseek and ChatGPT?
This raises big questions about AI regulation and economic stability. Should governments be stepping in to manage AI-driven market disruptions, or is this just the new reality?
It’s wild how quickly something like this can shift market dynamics. I guess it goes to show how reliant we’ve become on a handful of tech giants—if one new player can cause this much chaos, we might be due for some serious changes in the AI space.
This is a pivotal moment for the AI race. With China now playing a much bigger role in AI development, it’ll be interesting to see how other nations respond in terms of policy and innovation.
It’s interesting how quickly the release of a single AI model can create such global ripple effects. The impact on U.S. companies seems huge, but it also feels like we’re witnessing a shift in the global tech landscape. It’ll be fascinating to see how Western companies respond to this new competition from China.
The speed with which Deepseek R1 has affected the market is staggering. It seems like we’re on the brink of a major shift in how global economies and tech industries interact. Curious to see how this will influence U.S.-China relations moving forward.
The fact that a single AI model like Deepseek R1 can trigger such massive shifts in the market really highlights the influence China is gaining in the AI race. This could reshape the balance of power in tech.
The financial fallout from Deepseek R1 is alarming. It’s not just about tech, but also the global economic shift this AI might represent. I wonder if this could lead to more collaboration—or even a tech Cold War between the U.S. and China.
The rapid impact of Deepseek R1 on global markets really highlights how AI competition is shifting beyond just technological advancements—it’s now an economic and geopolitical force. It makes me wonder how regulators and major tech players in the West will respond to this kind of disruption. Do you think we’ll see tighter restrictions on AI imports, or will companies push for even faster innovation to keep up?
The rapid impact of Deepseek R1 on global markets is a stark reminder of how AI advancements are no longer confined to Silicon Valley. It raises an important question—how will regulators and tech leaders in the West respond to this shift in AI dominance? The next few months could redefine the balance of power in the AI space.
The trillion-dollar loss is a wake-up call to how quickly technology—especially AI—can disrupt established economies. Do you think this kind of sudden upheaval will become more common as AI advances?
It’s fascinating how quickly Deepseek R1 has shifted the dynamics of the tech industry. This AI release is clearly a game changer for the global market—it’s almost like the AI cold war is upon us!
While the financial impact is clear, what’s equally interesting is how the tech community will adapt. Will this prompt more collaboration between nations, or double down on the competition? The global balance of power in AI could be changing.
The impact of Deepseek R1 on the global market is staggering. It’s fascinating (and a bit unsettling) to see how quickly new technologies can shift the financial landscape. I wonder how U.S. companies will respond in the long run—will they double down on AI, or could this spark a new round of tech regulation?
It’s incredible to think how quickly Deepseek R1 has shaken things up. The U.S. tech sector has really taken a hit, but it seems like this is only the beginning of how AI will challenge global markets.
Interesting take on the Chinese AI revolution. This feels like a major tipping point—Deepseek R1 could be the catalyst for a whole new global competition. Curious to see what this means for international AI regulations moving forward.
It’s wild how fast Deepseek R1 has made waves. The tech industry is used to disruption, but this is on another level—especially given the sheer scale of the financial losses. It’s like we’re entering a new phase of AI competition that could redefine global markets.
It’s incredible how quickly the market can shift based on a single release. The rise of Deepseek R1 underscores how quickly the global AI landscape is changing, and it seems like we’re only scratching the surface of its impact.
The release of Deepseek R1 really shows how quickly the AI landscape can shift. It’ll be interesting to see how U.S. companies adapt—whether this is just a short-term blip or if it signals a deeper realignment in the global tech race.
This is just the beginning—AI’s rapid growth is a double-edged sword. While it opens up huge opportunities, it also brings about a lot of disruption. Do you think the global market will adapt or continue to see chaos in the near future?
It’s fascinating how the launch of Deepseek R1 has caused such a dramatic shift in the global economy in such a short time. The potential for AI to disrupt financial markets is clearly huge, but I wonder if this is just the beginning of more surprises like this.
It’s fascinating to think how quickly AI can alter the financial landscape. A trillion-dollar shift in such a short time is almost unimaginable. I’m curious if this signals the start of a much deeper global shift in how we think about tech competition.
It’s wild to think that one AI model can cause such massive shifts so quickly. Makes me wonder how the U.S. will respond to the growing AI competition from China. This could change the tech landscape forever.
It’s fascinating to see how quickly China’s AI advancements are making waves globally. Deepseek R1 seems like it’s not just a competitor to existing tech giants, but a major disruptor. Could this be the beginning of a fundamental shift in the AI arms race?
The speed at which Deepseek R1 has disrupted global markets is a clear sign of how AI is reshaping economic power dynamics. It raises serious questions about whether U.S. tech giants were caught off guard or simply underestimated China’s AI capabilities. Do you think regulatory intervention will slow this shift, or is it too late for that?
Deepseek R1 is definitely a game changer. It’ll be interesting to see how U.S. companies adapt to this new challenge. Will they ramp up innovation, or could they become more risk-averse in the face of this sudden competition?
The release of Deepseek R1 and its immediate financial impact highlight just how rapidly the AI landscape is shifting. It raises big questions about global AI competition, regulatory responses, and the future of tech dominance. I’d be curious to hear thoughts on whether this is just a temporary market shock or a sign of China taking the lead in AI innovation.
I feel like we’re only seeing the tip of the iceberg with AI innovation. If Deepseek R1 is capable of causing this much disruption in just a few days, what does that mean for the next 6-12 months?
It’s fascinating how quickly AI developments can ripple through financial markets. Do you think this is just a temporary shock, or could it signal a long-term shift in the balance of tech power globally?
The rapid impact of Deepseek R1 on global markets highlights how AI competition is shifting economic power in real time. It’s fascinating—and a bit alarming—to see how quickly a new player can disrupt trillion-dollar industries. The real question is, how will governments and corporations respond to this kind of volatility in the long run?
The rise of Deepseek R1 really highlights how competitive the AI race has become. I wouldn’t be surprised if we start seeing more countries push to develop their own models, especially as they try to keep pace with China’s advancements in this space.
It’s crazy how one AI release can have such a massive ripple effect. I wonder how long it will take before we see some kind of regulatory response from the U.S. or other countries to try to contain this.