The Rise of DeepSeek and Its Global Impact

In January 2025, DeepSeek, a Chinese AI company, sent shockwaves through the global technology landscape. With the release of its open-source AI models, DeepSeek not only challenged the dominance of American AI firms like OpenAI but also triggered a massive $1 trillion stock market loss in the U.S. tech sector. The company’s business model—offering free AI services while charging only for developer tools—has disrupted the traditional AI economy, which relies on proprietary, subscription-based services.

A New Cold War in AI

The rapid rise of DeepSeek signals a new front in the ongoing technological cold war between the United States and China. Until recently, Washington and Silicon Valley were confident in America’s AI superiority. However, DeepSeek’s emergence has shattered that illusion, demonstrating that China can develop cutting-edge AI technology at a fraction of the cost. This development echoes the “Sputnik moment” of 1957 when the Soviet Union’s satellite launch forced the U.S. to rethink its approach to space and defense technologies. Now, policymakers in Washington must grapple with an urgent question: If China can produce revolutionary AI advancements out of nowhere, what else is on the horizon?

The Economic Implications of DeepSeek

DeepSeek’s success threatens the revenue streams of AI companies that have built their business on paid subscriptions and proprietary technology. The release of a powerful open-source AI model means that:

• OpenAI and similar companies may struggle to justify premium pricing.
• AI-powered services such as DeepL (a leading translation service) face an existential crisis as free alternatives become available.
• Nvidia, the dominant provider of AI hardware, has seen a sharp decline in stock value as DeepSeek’s efficiency reduces the need for expensive GPU clusters.

Despite these disruptions, cloud-based technology giants like Amazon, Google, and Meta remain largely unaffected. Unlike OpenAI, which sells AI-generated responses as a product, these firms monetize user behavior. Data has become the most valuable resource in the digital economy—far surpassing traditional commodities like oil or gold. The ability to analyze, predict, and manipulate user behavior provides these companies with unparalleled power, shielding them from fluctuations in AI technology itself.

The New Digital Commodity: User Information

Historically, wars have been fought over scarce resources—gold, spices, oil, and land. These commodities shaped economies, fueled empires, and drove conflicts for centuries. Today, the most valuable asset is not a physical resource but digital information. The ability to track, process, and monetize user data determines market power in the modern economy.

Data collection is no longer just a method of improving services; it is the backbone of economic control. Companies that dominate data-driven industries can predict purchasing behavior, influence political opinions, and even shape societal trends. This shift has led to increasing competition between nations and corporations to secure digital dominance, often leading to geopolitical tensions.

While AI models like DeepSeek challenge traditional business structures, they do not threaten the foundation of data-driven monopolies. Companies that control data streams—from search engines to e-commerce platforms—hold the keys to economic and political influence. The battle for AI supremacy is, at its core, a battle for data control, and whoever controls the flow of information will dominate the future.

Open-Source AI vs. Proprietary AI: A Paradigm Shift

DeepSeek’s open-source model represents a fundamental shift from the proprietary approach that has defined AI development in the West. Traditionally, American AI companies have relied on vast datasets—often compiled from users’ personal information—to create powerful models locked behind paywalls. DeepSeek’s decision to make its model freely available changes the rules of the game by:

• Empowering developers worldwide to build upon and customize AI models without licensing fees.
• Reducing the entry barrier for new AI startups, fostering greater innovation outside of Silicon Valley.
• Forcing American AI firms to reconsider their pricing strategies and potentially embrace open-source principles themselves.

However, open-source AI does not disrupt cloud monopolies in the same way. Even if AI models become widely available for free, the infrastructure needed to collect and process user data remains in the hands of a few powerful corporations. The monetization of AI is shifting from selling access to AI itself to integrating AI into larger ecosystems designed to track and influence behavior.

The Future of AI and Market Competition

One of the most profound implications of DeepSeek’s rise is its challenge to traditional business models. AI services have been commodified—sold as products in competitive markets—but DeepSeek has now decommodified AI by offering it for free. While OpenAI’s market-driven approach may falter, companies that embed AI into cloud ecosystems—such as Amazon, Alibaba, and Google—will continue to thrive.

U.S. Reactions and Policy Shifts

The U.S. government and major tech firms now face a pressing challenge: How to respond to China’s rapid AI progress. Potential responses include:

• Increased government funding for AI research to ensure American dominance.
• Stricter trade restrictions on AI-related technology exports to China.
• Policy incentives to encourage open-source AI development within the U.S.
• Potential intervention in AI markets to prevent monopolization by companies like OpenAI and DeepSeek.

The Path Forward

The AI landscape has changed forever. The emergence of DeepSeek marks the beginning of a new era where proprietary AI models may become obsolete, and open-source technology gains prominence. However, this transition will not happen without conflict. As the U.S. and China compete for dominance, regulatory battles, economic shifts, and new technological paradigms will continue to shape the future of artificial intelligence.

At the same time, this shift presents new opportunities. Developers, businesses, and researchers now have unprecedented access to powerful AI tools, enabling innovation at a scale previously limited to major corporations. The implications of this dual reality—both as a geopolitical conflict and a technological liberation—highlight the complexity of the moment. AI is no longer just a business—it’s a battleground in a new Cold War, but also a tool that could reshape industries and empower individuals worldwide.

By Ignacio Oroná (CBO)