I’m reasonably informed about major issues and trends impacting business and technology. Yet until this morning I had never heard of DeepSeek, a Chinese AI startup founded just over a year ago, or its founder Liang Wenfeng, a 40-year-old entrepreneur who graduated from a Chinese university I also was unfamiliar with. Liang’s smarts and innovation should be of great concern to every American who cares about the security and future of their country because he appears to have made monkeys out of the best tech minds in America, including Elon Musk and Sam Altman, CEO of OpenAI.
Tech stocks were roiled this morning because of growing awareness that DeepSeek possibly developed breakthrough artificial-intelligence models that offer comparable performance to the world’s best chatbots at a fraction of the cost. While Musk, Altman, the AI gurus at Google, Meta, Microsoft and legions of Wall Street analysts believed that hundreds of billions of dollars of AI investments were required to maintain a competitive edge over China, Bloomberg reported that Liang founded DeepSeek with a mere 10 million yuan ($1.4 million).
Even more alarming, DeekSeek has less than 10 employees, CGTN, China’s state-run English language news channel, reported. Liang reportedly launched DeepSeek as a research project, not a commercial enterprise.
DeepSeek claims to have built its new AI model in just two months for less than $6 million – a fraction of the training costs of its US rivals. It supposedly did this with one hand tied behind its corporate back. The U.S. prevents the export of Nvidia’s powerful and considerably more costly computer chips, a ban intended to prevent China from leapfrogging the U.S. as the global AI leader.
“While it remains unclear how much advanced AI-training hardware DeepSeek has had access to, the company’s demonstrated enough to suggest the trade restrictions have not been entirely effective in stymieing China’s progress,” Bloomberg reported.
Shares of Nvidia plunged nearly 17% today as the market pondered whether the company’s chips are as indispensable to AI development as widely believed. The selloff caused $589 billion of Nvidia’s market capitalization to vaporize – the largest single-day company decline in the history of the US stock market, according to Bloomberg. Nvidia already held the record after a 9% decline last September caused $279 billion in value to evaporate.
Liang was born in 1985 in Zhanjiang, Guangdong, and holds a Bachelor of Engineering in electronic information engineering and a Master of Engineering in information and communication engineering from Zhejiang University.
In 2016, Liang co-founded the quantitative hedge fund High-Flyer, which developed successful AI-driven trading strategies. Within five years, High-Flyer had fully integrated AI into its operations, using machine learning models to predict market trends and make data-driven investment decisions, CGTN reported.
In May 2023, Liang founded DeepSeek, with the goal of spawning “curiosity-driven exploration” that could drive meaningful AI research and development advancements. Liang wasn’t intimidated by the supposedly unrivaled brilliant minds of Silicon Valley and the mountains of cash being showered upon them.
“More investment does not necessarily lead to more innovation. Otherwise, large companies would take over all innovation,” Liang said.
DeepSeek’s employees reportedly are all fresh-faced graduates from Chinese schools like Peking University and Tsinghua University. Liang is a huge fan of Chinese-educated tech students and says that hiring them is critical for China’s emergence as a global AI leader.
“If you’re pursuing short-term goals, hiring experienced people is the right move,” Liang said. “But in the long run, experience matters less. Foundational skills, creativity, and passion are more important. From this perspective, there are plenty of suitable candidates in China.”
Compare Liang’s commitment to developing the tech talent of Chinese citizens to the positions of Elon Musk and Vivek Ramaswamy, who have publicly maintained there is a paucity of Americans with the smarts, talent, and drive to develop AI, which is why they argue Big Tech must be allowed to hire more workers from India to remain competitive. In fact, the primary reason for hiring more foreign workers is they will gladly work for lower wages and are more obedient because their temporary visas are conditioned on having U.S. employment.
Critical military applications
AI is a critical component of China’s strategy to become the global dominant power by 2050. China’s 2019 white paper on national defense championed the theory of “intelligentized warfare,” in which leveraging AI is vital to the modernization plans of the People’s Liberation Army.
The U.S. believed it could thwart China’s AI military ambitions by curbing its access to advanced semiconductors, but that strategy was possibly mistaken. Another competitive advantage that China enjoys is that all its indigenous companies and CEOs are loyal to Team China, including Liang.
Liang recently participated in a symposium in Beijing, where Chinese Premier Li Qiang sought opinions and suggestions from experts, entrepreneurs, and representatives across various sectors—including education, science, culture, health, and sports— to develop a cohesive government strategy.
Liang keeps a low profile, but in a rare interview with a Chinese tech publication, he spoke of the importance of China achieving AI supremacy and what it would take to achieve that goal.
“Innovation is expensive and inefficient—sometimes even wasteful,” Liang said. “Only when an economy reaches a certain level of development can innovation thrive. When resources are scarce or in industries not driven by innovation, cost and efficiency are critical. Look at OpenAI; it burned a lot of money to get where it is.”
Liang emphasized the need for China to shift from follower to leader and build its own technological ecosystem.
“NVIDIA’s leadership isn’t just the result of one company’s efforts; it’s the collective achievement of the entire Western tech community and industry,” Liang said. “They can see the next generation of technological trends and have a roadmap. China’s AI development needs a similar ecosystem. Many domestic chips fail to develop because they lack a supporting tech community and rely on second-hand information. That’s why China must have people at the forefront of technology.”
Peter Hegseth, who was confirmed at President Trump’s defense secretary, fortunately understands the importance of AI in warfare and pledged during his confirmation hearings that he would prioritize investments in AI, drones and counter-drone systems, among other technologies that he considers key to military modernization. I wonder why the U.S. military isn’t being revamped to attract the best and brightest AI developers, much like Israel’s military is the training ground for that country’s best technologists.
Elon Musk’s talents and intellect would better utilized for that effort, rather than finding ways to cut government spending waste. Of course, that wouldn’t be in his best financial interests and could cause him to run afoul of China’s communist government, which granted him special privileges to allow Tesla to operate independently in that country in exchange for helping China become the global leader in electric vehicles.
Technology utopian
The Wall Street Journal reported that Xi Jinping regards Musk as a “technology utopian with no political allegiance to any country.” Musk has repeatedly expressed his admiration and support for Xi’s regime, and its campaign to end poverty and bolster China’s middle class. Meanwhile, wealth disparity in America is widening and more than 11 percent of the population lives in poverty.
Sam Altman, OpenAI’s CEO, seemingly questioned Musk’s patriotism after Musk trashed a potentially $500 billion AI initiative announced with great fanfare by President Trump. The project is funded by Japan’s SoftBank Group, Altman’s AI, and Oracle’s Larry Ellison.
Musk publicly insisted that SoftBank doesn’t have the funds to make good on its promised commitment.
Billionaire Alexandr Wang, the founder and CEO of San Francisco-based Scale AI, posted that DeepSeek in fact gained access to Nvidia’s premium chips but can’t talk about it because it would be a confession that the company circumvented U.S. export controls.
Musk replied, “obviously” but didn’t elaborate what, if any, evidence he had to substantiate his claim. If true, helping the Trump administration better enforce export restrictions would also be a better use of Musk’s talents than curbing government waste.
President Trump said he sees DeepSeek’s success “as a positive” and that his tariffs will ensure that America maintains AI supremacy over China.
“The release of DeepSeek AI from a Chinese company should be a wake-up call for our industries that we need to be laser-focused on competing to win,” Trump told House Republicans. “Because we have the greatest scientists in the world, even Chinese leadership told me that. They said you have the most brilliant scientists in the world.”
I wonder if Trump is familiar with the story of Brer Rabbit and the Tar Baby.