The revealing of the semi-free DeepSeek AI model by a Chinese company – a competitor to the high-cost American GPT model – has sent shockwaves through global financial markets, and particularly in the US.
DeepSeek’s launch triggered a sharp decline in US tech stocks, with industry leader Nvidia seeing its shares plunge as much as 13%, resulting in a staggering $465 billion loss in a single session. In response, Morgan Stanley urged investors to diversify their portfolios by incorporating energy stocks.
Although this development came as a surprise, it was not entirely unexpected, given the ongoing challenges facing these companies. The technological rivalry between the US and China shows no signs of slowing, and will not stop, especially after China announced the completion of over 30,000 ‘smart factories’.
This has reignited trade protectionism, driven by multiple objectives, including shielding American tech companies, whose competitiveness is waning against the rise of China’s tech industry. The Chinese market continues to offer high-quality and cost-effective products, with some of its models and technology now outperforming their American peers in efficiency and speed.
Who’s spending most on AI?
As for the rest of the world, competition in the tech industry remains limited, as it requires massive investments, exceptional intelligence and advanced training. Despite France allocating $30 billion and Britain $10 billion to the development of AI, these are merely a drop in the ocean compared to the vast investments made by the two industry giants. The US allocated $570 billion in AI over 2024 and 2025.
Countries such as India, Russia, Brazil and the GCC nations are making significant efforts to establish a strong presence in AI technology. The GCC countries have allocated $50 billion for AI investments.
The technological war between the two superpowers did not begin with the recent Chinese AI model, but escalated sharply with the rise of Huawei, which rapidly gained a strong foothold in global markets, including in the EU.
In response, Washington pressured these countries to cancel multi-billion-dollar agreements signed with Huawei, citing national security concerns for NATO members. Several EU nations complied, leading to continued pressure on other Chinese tech firms, including TikTok, which has dominated the social media landscape—even in the US.
Battle for AI will only intensify
It appears that the rivalry will continue to evolve and intensify through various means and pressures, as it revolves around future vital industries. The winner will shape key global trends and secure significant advantages, positioning itself at the forefront of AI technology—and, ultimately, the future of the world.
These anticipated gains encompass trade, investment, political, military, and security aspects. This is where American and Western concerns arise, particularly as China-Russia cooperation reached new heights of coordination following the Ukrainian war. With the conflict nearing its resolution, President Trump’s victory and his commitment to ending global conflicts, including the Ukraine-Russia war, have further amplified these concerns.
From a commercial perspective, most local and international business transactions in coming years will be conducted through AI applications, leading to significant financial gains for the owners of these models. The pricing and quality of these technologies will be determined based on demand, irrespective of political alliances.
Developing and emerging countries, in particular, will seek affordable technology that align with their financial capabilities. This trend will shape global investment and capital flows. Consequently, this field of trade and investment will have profound geopolitical implications, leading to the creation of new alliances driven by mutual interests, which will, in turn, bring about major shifts in the global balance of power.
On the military front, this field is one of the fastest-growing areas for the application of hi-tech, with serious implications that will shape the outcomes of conflicts, reducing the need for direct military intervention and heavy equipment. A single press of a button could potentially neutralize a significant portion of an adversary’s human resources and equipment.
This can be clearly observed in the pager incident in Lebanon last year. In turn, this will impact the security of countries, fuelling internal conflicts, interfering in their vital sectors and enabling the penetration of their systems for sabotage, resulting in significant financial losses.
What has been outlined above is merely the visible tip of an iceberg, representing intense conflicts and competition in which all means will be utilised.
