China pulls a Silicon Valley on… Silicon Valley

Politico

28-01-2025

Presented by Spectrum for the Future
When Chinese artificial intelligence startup DeepSeek rocketed to the top of the AI race over the weekend, it upended not just a ruthless corporate competition for tech supremacy but a geopolitical one. America was supposed to be the world leader on AI; suddenly, China had a credible claim.
Wall Street was shocked. So was Washington. And yet for anyone familiar with previous digital upheavals, it shouldn't have come as much of a surprise.
Silicon Valley's own mythos is built on the tech-world challengers who beat the odds and slew corporate Goliaths through sheer technical ingenuity. If anything is remarkable about the seeming DeepSeek coup, it's that companies like OpenAI — which were scrappy, disruptive startups just a couple of years ago — have already matured into the kind of big, connected firms that get caught on their back foot by faster-moving rivals.
'There's a certain extent to which maybe [large AI firms] thought this was harder to do than it was,' Dean Ball, a research fellow at Mercatus and author of the Hyperdimensional newsletter, told DFD.
Given America's strict export controls on high-end chips, analysts are still trying to figure out the exact details of how DeepSeek managed to match the top American models on a shoestring. DeepSeek itself claims it was done with ingenuity rather than fancy equipment — based on good old-fashioned optimization and low-level programming grunt work.
'You can keep compute away from China, but you can't export-control the ideas that everyone in the world is hunting for,' Ball said. 'This is just 1,500 lines of Python code, and it's going to spread.'
Silicon Valley, and much of our modern digital landscape, was built on exactly such ingenious workarounds. In the 1980s IBM had a seemingly permanent stranglehold on the nascent personal computer market, until entrepreneurs and tinkerers across the country reverse-engineered the company's vaunted firmware to make their own cheaper, faster competitors. In the Web era, Google Chrome dethroned its clunky, monopolistic predecessor Internet Explorer using open-source components. (The David-and-Goliath effect can sometimes even spill over and revolutionize other, non-"tech' industries, as in the case of the Napster founders realizing that people might prefer to listen to music on their computers rather than by buying it on pricey plastic discs.)
When this kind of out-innovation happens in the private sector, it's celebrated as 'disruption,' the lifeblood of American capitalism. When it happens at the hands of a Chinese firm and embarrasses a multi-billion-dollar national champion industry, as President Donald Trump's new administration wants AI to be, it's cause for alarm. Senate Majority Leader John Thune (R-S.D.) told POLITICO today that the DeepSeek model's performance is 'a wake-up call for us that we've got to step up our game,' and venture capitalist and Trump ally Marc Andreessen declared it 'AI's Sputnik moment.'
There's a huge irony at the heart of this problem, and Andreessen's post (unintentionally) gets right at it. The tech world, particularly its right-leaning elements, have for years used the threat of Chinese supremacy to advocate for more government investment and support. The result is a tech industry whose relationship with government has slowly grown to resemble that of stalwart aerospace giants like Boeing and Lockheed Martin, their products given special treatment by a government that sees them as crucial to national security.
Eric Schmidt, the longtime Google CEO and founder of the Special Competitive Studies Project focused on U.S.-China geopolitical competition, wrote in an op-ed published in The Washington Post today that America should invest more in research and development to maintain the U.S.' 'competitive edge,' and that 'there is clearly mounting pressure on America's Big Tech players if DeepSeek can compete with them using far fewer resources.'
Despite his newfound closeness with American AI companies, Trump actually embraced the DeepSeek news, calling it a 'positive development.' He said that he hoped 'instead of spending billions and billions, you will spend less and you'll come up with hopefully the same solution.'
So which part of the industry is going to prevail? Ball told DFD that likely the compute heavyweights and their flyweight counterparts do ultimately need each other — the breakthroughs achieved at great cost by companies like OpenAI, then inevitably replicated by a cheap competitor, and vice versa, in a never-ending cat and mouse game that speeds up innovation overall.
'There's not some finish line we're racing to,' Ball said. 'We're going to get models that are more capable, and the country that quote-unquote 'wins' will be the country that has the most creative and wide-ranging uses for AI, and that's going to be compute-expensive and require a huge infrastructure buildout.'
Still, if America's established AI players hope to keep up and avoid surprises like this most recent one — and, maybe more importantly, maintain the political credibility that allows them to make big asks of their federal government — they might need to pay more attention to their competitors, and reacquaint themselves with the improvisational, cheaper-is-better ethos on which Silicon Valley was built.
mr. musk goes to washington
Lawmakers are skeptical of Elon Musk's plans for an overhaul of government, given his apparent lack of familiarity with it.
POLITICO's Andres Picon reported for E&E News this morning on a chorus of Washington lawmakers who support his goals but think the tech mogul is in for an education in how the capital (and indeed the Capitol) works.
'I think what [Musk is] learning is that the rules around here, how you cut the government — there's political realities,' Senate Budget Chair Lindsey Graham (R-S.C.), said. House Agriculture Chair Glenn 'G.T.' Thompson (R-Pa.) said he 'would welcome Mr. Musk to come and sit down so we can have a really good conversation about agriculture, because I want him to understand American agriculture.'
And furthermore, even some Republican lawmakers are concerned about potential conflicts of interest: 'Say you're the chairman of a committee. … Would you be concerned that Donald Trump at some point would say, 'Hey, I've got this great idea: Elon's gonna give me $10 and I'm gonna lease NASA to him for the next 50 years'?' one anonymous longtime Republican lawmaker said. 'You know that kind of shit is possible … You have to wonder about the separation between the best interest of the country and the best interest of Elon.'
fact-checkers under fire
Fact-checkers have been under siege since Meta's Mark Zuckerberg made his high-profile call to stop working with them.
POLITICO's Mathieu Pollet spoke to five people at fact-checking organizations Meta once partnered with. They all said they've faced increased online harassment, attacks from politicians and even death threats in recent weeks.
'The first thing we've noticed after Zuckerberg's statement … was a huge spread of harassment toward fact-checkers,' Aistė Meidutė, editor of the Lie Detector fact-checking project at the Lithuanian news outlet Delfi, told Mathieu. 'It was a huge beat to our credibility. We see the after-effects right now … We are very worried.'
Although Meta's announcement was rolled out in the U.S., observers think it won't be long before the policy shift reaches Europe as well — even though that will set the U.S. company up for a clash with the European Union's Digital Services Act. 'It's hard for me to understand why they would keep the program here in its current form if they won't have it in the U.S. where they are under the most direct political pressure anyway,' said Morten Langfeldt Dahlback, the head of innovation at Norway's fact-checking firm Faktisk.
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