The DeepSeek effect

US tech companies have increasingly relied on AI to drive their valuations in recent years. Big Tech’s promise of AI has led to dramatic fluctuations in the global stock market. Although former US president Joe Biden’s tenure will be remembered for empowering anti-monopoly figures like Lina Khan, the tech sector has still managed to maintain its dominance in the AI race. The US sought to block China’s access to its prized AI chips through a series of trade restrictions, aiming to maintain its lead in artificial intelligence (AI). Yet, in a twist reminiscent of the hare and the tortoise, China has made significant gains, challenging US-led AI supremacy. A Chinese company, DeepSeek, has launched an AI-powered chatbot – also named DeepSeek – that rivals OpenAI’s ChatGPT. More significantly, this model was developed at a fraction of the cost, sending shockwaves through global markets and wiping out nearly $1 trillion in value from major US tech firms.

In fact, investors are now reconsidering the landscape of AI competition, with many now thinking that this shift calls for a fundamental reassessment of US strategy. The American tech industry has long mastered the art of conspicuous consumption, building high-end ‘Superbrands’ and tying consumer worth to exclusive labels. This mindset has permeated its tech sector, where innovations are often driven by profit maximisation rather than accessibility. AI, instead of being a democratising force, has become another tool for corporate revenue growth, with exorbitant costs restricting its benefits to a select few.

China’s DeepSeek has disrupted this setup. In what US President Donald Trump says is a ‘wake-up call’, it has highlighted the risks of prioritising profit over building strong, scalable systems that serve a wider population. It has also exposed the limits of sanctions, proving that determined nations can navigate restrictions to carve their own technological path. China’s slow and steady approach has yielded remarkable results, leaving little room for other countries to justify the soaring costs of AI applications. Even India’s IT minister recently acknowledged China’s progress and pledged to develop a similar cost-effective AI model for India. Unfortunately, Pakistan is nowhere in this race. Despite a pool of talented engineers, low job prospects are driving them out of the country. The government has failed to cultivate an ecosystem that supports AI-focused startups, leaving Pakistan trailing far behind its regional neighbours. While other countries are embracing AI to boost economic growth and innovation, Pakistan remains a spectator, lacking both policy direction and investment. If we hope to participate in the AI revolution, we must invest in our human capital and create an innovation-friendly environment. There is no ignoring the AI reality. We need to get on this before it’s too late.