Armed with a $6 million budget and a stockpile of semiconductors secured before US restrictions took effect, Chinese startup DeepSeek has achieved what the nation’s technology behemoths could not—creating a world-class AI chatbot.
This success, however, invites intense scrutiny, both from Western governments wary of China's technological strides and from Beijing, whose rigid regulatory oversight of the sector—though softened since 2022—continues to cast a long shadow, reports the AFP.
DeepSeek’s rise comes amid China’s concerted efforts to establish itself as a global AI leader. Despite a brutal regulatory crackdown in 2020 that stifled the country's tech giants, Beijing has since prioritised AI, pouring substantial investments into a fund launched last year to accelerate domestic semiconductor development in response to US export curbs.
In the race to rival OpenAI’s ChatGPT, released in 2022, major players such as ByteDance—the parent company of TikTok—and search giant Baidu have scrambled to develop competitive chatbot models. Yet, it was DeepSeek, an unassuming hedge fund venture, that ultimately delivered the breakthrough—sending shockwaves through global markets and erasing over half a trillion dollars from the market valuation of US chip giant Nvidia.
A Private-Sector Triumph
Remarkably, DeepSeek’s feat was accomplished without government subsidies.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, highlighted the significance of this, stating: “It is interesting that this breakthrough was achieved not by state-backed research institutions or enterprises, but by a hedge fund with no direct government funding.”
Despite this, Zhang believes the Chinese government will view DeepSeek’s success as an incentive to further encourage private-sector innovation in technology.
However, challenges lie ahead. In the US, calls are growing for authorities to tighten restrictions on the export of advanced chips to China. Meanwhile, President Donald Trump has vowed to impose sweeping tariffs on Chinese goods in response to alleged unfair trade practices and the country’s purported role in the US fentanyl crisis, making any relaxation of chip restrictions unlikely.
China’s own policy decisions are also increasingly shaped by national security concerns. In a speech this week, President Xi Jinping underscored the “complex and severe” geopolitical challenges the country faced over the past year.
Western Scrutiny and Data Privacy Concerns
Despite these geopolitical tensions, DeepSeek’s AI chatbot has captivated global users, surging to the top of Apple’s App Store download charts.
Yet, its rapid expansion into Western markets may reignite concerns over data privacy and state surveillance—an issue that has plagued other Chinese tech firms.
Regulatory bodies have imposed stringent controls on generative AI within China, ensuring that content adheres to the Communist Party’s official stance on contentious issues, from Taiwan’s sovereignty to human rights allegations.
AI models are also mandated to uphold Beijing’s “core socialist values” in an effort to maintain “social stability.”
A major stumbling block for DeepSeek’s global ambitions could be the way it handles user data.
Comparisons are already being drawn with TikTok, which faces potential bans in the US over fears that data stored on Chinese-owned servers could be accessed by the government in Beijing.
"DeepSeek’s cost efficiency is praiseworthy, but the privacy implications of its data collection would raise significant concerns," said Saeed Rehman, senior lecturer in cybersecurity and networking at Flinders University. "This situation may evoke similar concerns to those raised for TikTok, where data privacy and security have been hotly debated."
A Precarious Path Forward
DeepSeek’s founder, Liang Wenfeng, has long been convinced that AI would “change the world.”
Now, his company finds itself at the centre of an intensifying global debate over technology, security, and market dominance.
As DeepSeek continues its meteoric rise, its ability to navigate geopolitical headwinds and regulatory scrutiny will determine whether it cements its place as a dominant force in the AI landscape—or falls victim to the very tensions that have propelled its breakthrough into the global spotlight.
