DeepSeek Enters the Fray: Implications for Open-Source AI, Tech Giants, and US-China AI Competition

DeepSeek’s R1 open-weight reasoning model, which matches the performance of leading proprietary models, could democratize AI development, though it may also heighten risks of algorithmic jailbreaking by malicious actors. While R1’s efficiency challenges Nvidia’s dominance in GPU sales by delivering top-tier performance with lower compute costs, the market's response may be overstated, as cheaper model training could drive higher overall costs. Additionally, US export controls limiting China’s access to advanced AI chips forced DeepSeek to innovate, and tighter restrictions could spur Chinese innovation in semiconductor design, further intensifying the US-China AI competition.