Deepseek is Chinese economic sabotage

Think about it.

The US stock market is at all time highs because of the Magnificent 7 and the new promise of AI. A large portion of the growth of the US stock market in recent years has been because of investment in AI - people are investing in Nvidia in the hopes that when the AI dream pans out, everyone will make millions.

The problem is that, current LLMs require a lot of computing power, which was driving up demand for Nvidia and other semiconductor stocks. Nvidia could set the price to whatever they wanted and still sell out everything they had, driving their valuation to all time highs.

A lot of people have been saying that the US stock market is in a bubble because of this - because the valuations had become absurdly high and detached from reality.

Anyway, in order to sabotage that, you would have to do one of two things. You can either go after the supply, or the demand. Supply - TSMC, Nvidia, ASML, AMD, Intel (a little). But that's difficult and generally involves either outright physical attack, which is very risky and could backfire on the international stage. Or cyber attacks, which work but I imagine are difficult to pull off these days.

Killing the demand would require you to create an LLM that is an order of magnitude more efficient than what exists at the moment with at least similar performance. If you can do that, the demand for Nvidia chips drops massively - who would spend all that money on Nvidia computing power if you don't need to? Deepseek can do what other models can do but using much less computing power.

So demand for Nvidia drops, as does demand for OpenAIs services, as does demand for well just about every tech stock in existence day. ASML, AMD, Intel, Meta, Alphabet, the list goes on - in some way, these have all ridden the AI wave to all time highs. Now demand will drop, suddenly.

How better to ensure this than to publicly reveal a new LLM that is much more efficient while also revealing the source code? Revealing the source code means that anyone can clone the repo and verify your claims themselves. Depending on the license terms, anyone can use Deepseek for their own ends, which means you don't need to buy as much from Nvidia as you used to.

In a more abstract sense, as long as the claims can be verified, Deepseek will make all consumers of AI technology realize that with a bit of software engineering effort, they can massively reduce their GPU requirements. Previously nobody was thinking along these lines - Deepseek changed how everyone thought about AI by making them realize it can be done much more efficiently.

Lastly, think about who made it. A Chinese hedge fund made it as a side project - really? A side project? My guess is one of two things - either the Chinese government instructed them to research this to see if it was possible to make a more efficient LLM, or, it really was a side project but they were instructed to open source it by the Chinese government once they realized what it would do.

There is no way that you're smart enough to invent an LLM an order of magnitude more efficient than anything the West could produce and not realize what this would do to the Western economy.

"But what else could have happened?"

They could have monetized it, which believe it or not would have been less damaging. The new AI upstart would get a lot of traction, but damage to the US economy would have been minimal.