The Warning Signs Were There
Global financial markets are roiled today based upon the announcement last week by Deepseek that their new AI models are able to meet and exceed US Competitors at a small fraction of the cost in resources, capital, and level of effort.
The DeepSeek announcement is being touted as a breakthrough in AI-driven analytics, as it combines advanced machine learning algorithms with big-data processing to deliver near-real-time insights into market behavior. Central to the update is an enhanced artificial intelligence engine capable of ingesting vast amounts of structured and unstructured data from global markets in real time.
This is not as stunning a surprise as market and pundits would have you believe. There have indeed been signals from certain sources for months that this was an evolving issue.
Foremost on topic has been a thought leader in AI & Big Data for over a decade, Eric Schmidt, former CEO of Google. The warning calls have been repeatedly cited since his publication of a book co-authored with former Secretary of State Henry Kissinger, Genesis, in multiple formats, articles & interviews. For example, during his ABC interview on December 15, 2024,he called out DeepSeek by name among other evolving threats.
The following week, during his Washington Post interview on December 19, 2024, Mr. Schmidt highlighted, among other evolving threats, the ability & efficiency of Chinese engineers to evade the US AI Chip prohibitions in developing their own AI software. His list of threats includes the development efficiency model, as well as others.
- 1. Chinese software engineers have learned how to do things (AI) with fewer chips
- 2. China is more focused than the US on winning and are centrally controlled
- 3. China is willing to spend an enormous amount of money in this sector
- 4. China has an extremely fast adoption cycle of technology in both corporate and consumer sectors, once released
Mr. Schmidt went on to conclude that “there is every reason to believe That even if we win the first part of the race, China will eventually win the race because they adopt this sort of Technology more quickly and volume products.
A month earlier, interviewed by the Harvard Crimson, Schmidt said of China, “They appear to have been able to assemble enough chips to pull it off’.
Schmidt was not alone. Going back to In a mid-2023 interview with The Wall Street Journal (shortly after his trip to China in May–June 2023), Elon Musk stated he believes China will be “unbelievably competitive” in AI. He also said that both the U.S. and China need to ensure “safety standards” and “guardrails” for AI because both countries have enormous resources devoted to training large models.
Markets React
The impact has been devastating. Today’s shift in financial markets has been seismic. Total estimated capital loss in market value for major U.S. tech companies and related sectors is approximately $900 billion.
- Nvidia: Nvidia saw the largest drop among U.S. tech companies, with its stock plummeting between 13% and 16% - $475 Billion. This decline erased hundreds of billions of dollars from its market capitalization, marking one of the worst single-day losses in its history
- Broadcom: Shares fell over 12%, reflecting concerns about reduced demand for high-end AI chips, $116 Billion
- Microsoft $130 Billion
- Meta Platforms: Meta's stock dropped nearly 2%, despite its ongoing efforts to develop open-source AI models
- The Nasdaq Composite, heavily weighted with tech stocks, dropped by over 3%, and the S&P 500 fell nearly 2%, reflecting the broader impact on the market
Overall, DeepSeek’s entry into the financial analytics arena signals a shift toward more sophisticated, data-centered market operations—one that could reshape global technology and finance in the coming years.
Warning Signals
But it was not just Eric Schmidt or Elon Musk sounding the alarm, this has been publicly announced elsewhere as well. For example, Dr. Kai-Fu Lee, Author, Chairman & CEO, Sinovation Ventures, CEO, 01.AI, (and curiously, the former CEO of Google China), was articulate and clear on this trajectory. In fact, he bridges both East and West as an author and technologist, with assets worth over $3 Billion USD in AUM.
His observations are keen and poignant: American companies are generally speaking 'more breakthrough Innovative' - they come up with new things and then the Chinese companies are better at engineering, execution, attention to detail, doing the grunt work; user interfaces, building apps.
Just 3 months ago, Dr. Lee shared these developments openly and specifically:
“We think we build more solidly faster, execute better, so as an example was I talked about how 01 now the third best modeling company in the world ranking number six in models measured by lmis and UC Berkeley - but the most amazing thing I think the thing that shocks my friends in the Silicon Valley is not just our performance but that we train the model with only $3 million and GPT 4 was trained by 80 to 100 million and GPT 5 is rumored to be trained by about a billion dollars... so when you do excellent detailed engineering you don’t have to spend a billion dollars to train a great AI, this is really important for the audience here.”
Ironically, it was just last week that Sam Altman, CEO of OpenAI spoke at a press conference announcing a $100 billion AI infrastructure effort aimed at keeping ahead of China. He stated, "I think this will be the most important project of this era."
Given the enormous change of direction in development for AI, the magnitude of risk of loss, and the tectonic market impact, why was this not accounted for? How did US markets get so blindsided by this news? Where were the warning calls, articles, interviews, blogs, tweets, etc.?
Chinese AI development capabilities were a known quantity. The DeepSeek release came out of nowhere and crashed US equity markets. There is little reason and no explanation for the lack of foresight and warning from US technology thought leaders and pundits alike.By:
Kevin Gori, Principal, Aegis Intel, kevin@aegisintel.ai
Nick Salian, AI Tech Evangelist, pos_don@yahoo.com
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