Mark Thomas
On Jan. 20, Chinese company DeepSeek released its R1 model, defying American dominance of AI. The model, which was built through software optimization rather than expensive microchip investments, beats leading competitors like OpenAI in several metrics and costs a tiny fraction of their development expenditure. The model’s innovative approach spooked microchip investors, prompting the largest single-day market cap loss in U.S. history for Nvidia.
DeepSeek is a harbinger of things to come. Regardless of which country takes the lead in AI, China will deploy its ample resources to lead the world in some, if not many, technological domains.
The nascent U.S. approach to technological competition with China consists of laws and institutions that rely on American dominance—incumbent tools. Financial sanctions depend on the hegemony of the dollar and of Western financial intermediaries. Export controls are designed to prevent U.S. technology that is not available elsewhere from reaching the wrong hands. The Committee on Foreign Investment in the United States (CFIUS) enables the government to block foreign direct investments into the United States that might compromise national security, including those that could lead an adversary to acquire sensitive technology. The recent Treasury Department rule on outbound investments restricts certain transactions between U.S. and foreign entities in order to prevent U.S. companies from helping rival countries by facilitating financing, know-how, or access to talent. Each incumbent tool of economic national security is designed to prevent foreign (usually Chinese) access to American assets (usually technology) with unique capabilities.
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