The Broligarchy was having a moment. Mark Zuckerberg, Jeff Bezos, Elon Musk and Sam Altman were all given front-row seats at Donald Trump’s inauguration. The respective heads of Meta, Amazon, X and OpenAI were visibly preferred to the members of the incoming US cabinet, who for the most part were seated behind them.
The message was clear, the United States under Trump is going to take its lead from it most successful technology entrepreneurs, complete with enhanced masculine energy in the case of Meta. The richest broligarch of them all, Musk, already has a disproportionate influence over the leader of the free world.
The reason for their preferment was also pretty obvious. A political movement such as Maga that takes as its founding principle that the world’s richest and most powerful country is actually a failed state needs to present a radical solution. Co-opting the men behind a small number of staggeringly successful business fits.
If we ever needed a reminder that even these gods have feet of clay, it is now. And one has come along right on cue in the form of DeepSeek, the Chinese artificial intelligence company which appears to have outflanked its US rivals and panicked the market.
Last week, DeepSeek unveiled a large language AI model called R1. It would appear to be as good as most of its rivals, including OpenAI’s ChatGPT and Meta’s AI.
The difference is that DeepSeek developed R1 at a fraction of the cost of its larger rivals and in the process questioned the fundamental assumption driving its rival’s AI strategy; that the future of AI will belong to whoever has the most and the fastest high-powered microchips.
The logic of the $224 billion bet on AI made last year by Musk, Zuckerberg and the others is now in question. As is the plan to double down this year with another $280 billion.
Investors are clearly rattled. Shares in Nvidia, the leading manufacturer of powerful microchips, fell sharply on Monday and $1 trillion was wiped off the value of the tech-dominated US stock market.
It is perhaps too early to pronounce Stargate, the flagship $500 billion AI infrastructure project backed by SoftBank, OpenAI and Oracle that was announced by Trump last week, dead in the water, but it is pretty clear a rethink is in order.
[ DeepSeek: US firms praise disruptive AI chatbot, try to poke holes in itOpens in new window ]
DeepSeek is the brainchild of a Chinese billionaire and hedge fund manager, Liang Wenfeng. His $8 billion High Flyer hedge fund uses AI extensively to spot investment opportunities and he established DeepSeek in 2023 as a side project. It built on High Flyer’s expertise and pulled in the best of the talent coming out of China’s leading universities.
Necessity proved to be the mother of invention for DeepSeek. Restrictions imposed by the US government on the export of Nvidia’s most powerful chips to China forced DeepSeek to focus on getting the most out of the less powerful chips available to it.
The company claims it was able to “train” an AI that is as good as its US rivals, using fewer and less powerful chips. It says the development of R1 cost €5.6 million, a fraction of the money invested by Google, OpenAI and the rest.
There is some poetic justice about a small – in relative terms – start-up eating the lunch of what were in their day some of the most disruptive businesses to ever emerge from the minds of men.
But it remains to be seen whether the advent of DeepSeek R1 turns out be the “Sputnik moment” that it has been christened by veteran Silicon Valley venture capitalist Marc Andreessen. Much depends on whether DeepSeek can compete long term with its larger US rivals if they pivot in response as the US did when it realised in the late 1950s the Russians had stolen a march on them in space exploration.
But there are already a number of take aways for the incoming Trump administration and its zero-sum America First credo. It is not an overstatement to say that the biggest threat to the US dominance of AI is a direct result of a policy – brought in by the Biden administration – intended to ensure its dominance was copper-fastened. If DeepSeek had access to the most powerful Nvidia chips, would it have bothered to put so much energy into getting more out of cheaper, less-powerful chips and upended the industry?
[ Donald Trump tells Davos: Make your product in the US or face tariffsOpens in new window ]
It looks like the US is about to make a similar misstep with the plan to end H-1B visas as part of the remaking of the United States. Ending the visa programme under which Silicon Valley can harvest the cream of the world’s tech talent may go down well with the Maga base. However, it is only going to broaden the pool of talent available to DeepSeek and others foreign rivals while putting US technology companies at a disadvantage.
These are just two examples from one industry of how America First policies such as protectionism and tariffs can backfire. There will be others.
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