Then, in 2020, everything changed. The outspoken CEO criticized aspects of the Chinese Communist Party’s policy during a speech in Shanghai. Soon after, he disappeared from public view, in the 21st-century equivalent of the Cultural Revolution’s practice of sending big-headed officials to farms in remote provinces. It was all part of Xi Jinping’s “Common Prosperity” drive, which was intended to check the mushrooming powers of China’s tech oligarchs.

But last week, to the surprise of many, Jack Ma re-surfaced at a business summit hosted by Xi. There he was, clapping away, after five years of exile. The summit itself was the first of its kind in six years, and included more tech entrepreneurs than the previous one. Although the star of the show was DeepSeek founder Liang Wenfeng, Ma’s reappearance seemed to indicate that the chill was over, and that the Party was willing to play with the oligarchs once more. After Xi reminded them that they were to “actively fulfill social responsibilities” and “promote common prosperity”, reports in official media suggested that the government wanted to support the private sector’s expansion.

For years China has been in a slump. Ever since the government-engineered deflation of the real estate sector hit households hard, most Chinese have reined in their spending. This has slowed down its rapid convergence with the US economy, with some suggesting that the country may never catch up. Western analysts tend to conclude that the Chinese economy is saddled with structural deficiencies that may block it from ever becoming a global powerhouse.

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But perhaps they’ve misjudged the CCP’s motives, failing to see that the setbacks may not result from policy errors but from deliberate plans. Puncturing the real estate bubble — painful though that has proven to be, since property remains the main savings vehicle for Chinese households — formed part of Xi’s strategy to reallocate resources towards “high-quality” growth, in particular in emerging tech sectors like AI and renewable energy. The Chinese leadership appears to have traded quantity of economic output for quality, with the idea that re-orienting resources to emerging sectors will serve the country better in the long run.

Judging from recent activity in the markets, the strategy may well be working. Although structural problems continue to beset the Chinese economy — including a deflated property market, weak consumption and an excessive reliance on manufactured exports — reports suggest that it may now be turning a corner. Over the New Year holiday, train travel and movie attendance set new records. And while real estate prices are still stagnating well below their 2020 peaks, the market may now have bottomed with activity in Shanghai starting to heat up again.

Meanwhile, the global winds may now be blowing in China’s favor. Since the DeepSeek breakthrough, money has begun flowing out of the US. The Magnificent Seven, which had previously powered the US stock market to a record share of total capitalization, have now started to slide, and the US market as a whole has hit a plateau. In place of the Magnificent Seven are China’s “Terrific Ten” tech stocks, which since DeepSeek’s “Sputnik moment” have powered the Hang Seng index to a double-digit surge. If this continues, Chinese households may soon feel they can afford to finally loosen their purse strings.

Arguably, Donald Trump’s policy turns are inadvertently strengthening China’s momentum. Having abandoned Joe Biden’s plans for a renewable energy transition, Trump’s administration has left one of the world’s fastest-growing sectors to Chinese producers. Its renewable energy and EV companies are aggressively expanding sales in almost all markets, most significantly in rapidly growing developing-country markets, and the effect is already showing in their share prices.

With sales slumping, Tesla had pinned all its hopes on its forthcoming automated driving feature. Then, out of the blue, China’s BYD introduced its ‘’God’s Eye” driver-assistance feature for free in all its cars. If the competition between these two auto giants is anything to go by, the global center of technological dynamism appears to be shifting. Whereas Tesla’s stock is down some 16% in the last month, BYD’s has risen by more than 40%.

It appears the Chinese leadership is now trying to sail into these tailwinds, with the rehabilitation of Jack Ma being a powerful symbol of its new openness to business, and particularly to tech entrepreneurs. Following last week’s summit, the central bank announced it would be implementing measures to make it easier for Chinese firms to obtain capital. And China has for months been talking of some major stimulus for the economy. But while there have been some tentative steps in this direction, we’re still awaiting a big announcement.

A key moment will probably come next week, when China holds its “Two Sessions” meeting of both the National People’s Congress and the Chinese People’s Consultative Congress, at which the government is expected to elaborate on the stimulus measures it announced late last year. If the Communist leadership is serious about supporting business, this would be the obvious moment to make it clear.

While China is aggressively expanding its trade ties and diplomatic presence around the world, the US is pulling up the drawbridge. Crucially, America is aping the old Chinese model in a manner that could prove self-destructive. Traditionally, China has been considered less investable than the US because it’s run by a party that can clamp down on business at any moment, unlike the free-market and institutionally stable West. However, the US is now run by a fickle oligarch who changes policy on a dime. At least in China one can discern a strategy — namely, the survival of the Communist regime — whereas in the US, it’s unclear whether Trump has an actual plan, or whether he’s motivated entirely by whims and Tweets.

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The apparent Chinese approach of engineering a downturn to weed out low-quality activity and then re-orient resources to dynamic sectors is hardly groundbreaking. Although the dominant neoclassical theory of economics generally regards any fall in output as a sign of economic ill-health, less orthodox schools such as the Austrians have always seen recessions as necessary to the process of renewal – a moment of creative destruction. In fact, one could argue that’s precisely what Elon Musk is trying to do with his DOGE experiment: induce a recession by dramatically cutting government demand, in the hope a more innovative private sector will then be free to pick up the slack.

Yet the similarities between the Chinese and American approaches probably end there. The Trump and Musk approach, which focuses on deregulation and tax cuts, will probably lead to greater capital concentration. Already, it’s entrenching the power of oligarchs, particularly those from the tech sector. China, by contrast, has reminded its oligarchs who is boss.

In the Seventies, there was an arcane Marxist debate about the character of the state in capitalist societies. The instrumentalists believed the state was controlled by the capitalist class which used it to advance its business interests, while the structuralists argued the state ruled in the best interests of the class when it had the relative autonomy to implement policies which, if harmful to individual businesses, were good for the economy. China might just be the archetypal autonomous state presiding over a pastiche capitalist economy, whereas the US is now run by businessmen using the state as an instrument to advance their version of capitalism. Which model is superior remains to be seen. But investors, previously all in on America, are now hedging their bets.

Britain, by contrast, has no comparable strategy. Its absence of long-term vision has made it an easy target for the Chinese Communist Party (CCP), whose strategic ambitions unfold over decades. Nowhere is this clearer than in the sale of Imagination Technologies, a crown jewel of British innovation whose semiconductor designs are powering the next technological era. Since its acquisition by a Chinese state-linked firm in 2017, Imagination’s Graphics Processing Units (GPU) and AI accelerator technology have been absorbed into China’s AI ecosystem, driving the very breakthroughs that now challenge Western dominance.

This was no ordinary corporate acquisition, but a reckless surrender of future-defining technology to a geopolitical competitor — a decision emblematic of Britain’s strategic myopia.

Imagination Technologies specializes in the design and licensing of energy-efficient GPUs. Originally developed for rendering film and video game graphics, GPUs have evolved into critical hardware for artificial intelligence (AI) development, now enabling breakthroughs in applications from productivity software to autonomous vehicles, and in military technologies such as automated weapons targeting, and drones. While Nvidia dominates the market for high-performance GPUs, Imagination’s expertise in mobile and low-power GPU design is strategically significant, enabling the mass deployment of AI across consumer and industrial networks. These technologies support AI integration in smart cities, autonomous systems, and the connected infrastructure of the future.

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For years, Apple was Imagination’s largest and most lucrative client. But that all changed in April 2017, when Apple announced it would no longer use Imagination’s technology, triggering a collapse in the firm’s valuation — from £2 billion to just £550 million. Within months, Canyon Bridge, a Delaware-based private equity firm heavily funded by China Reform Holdings — a Chinese state-owned enterprise under direct CCP oversight — moved in to acquire it. China Reform was, theoretically, positioned to exert influence over Canyon Bridge and, by extension, Imagination. Despite this warning sign, the UK Government approved the acquisition, reassured by promises that China Reform would remain a passive investor. This was a terrible miscalculation — and one that betrayed a naivety about how China’s centralised state apparatus executes strategy.

Illusions of China Reform’s “passivity” crumbled in 2020, when it attempted to install four of its own directors onto Imagination’s board. The move ignited a fierce backlash within the company and alarmed Government officials. Under mounting public scrutiny, Global Counsel — a “strategic advisory” firm founded by Lord Mandelson, now British Ambassador to the United States — was hired by Canyon Bridge to “reassure UK stakeholders” about Imagination’s operations.

Just months before this attempted coup, Mandelson, a former UK cabinet minister and then-president of the publicly funded Great Britain China Centre, traveled to China with his aide to discuss “cooperation opportunities” with China Reform’s senior leadership. By his own account, the visit was a success, deepening ties between China Reform and Global Counsel — an advisory firm that soon after (it claims coincidentally) was enlisted to manage the fallout of Imagination’s crisis. Mandelson denies involvement in the Imagination case. The optics, however, are disturbing: corporate — and, perhaps, political — influence diluted scrutiny of a state-linked transaction with lasting implications for Britain’s national security and technological future.

Though Whitehall ultimately blocked the board takeover, Britain had already lost control over Imagination. Company CEO Ron Black was sacked after citing concerns over Chinese government interference, while other senior executives resigned. Testimony uncovered by UK-China Transparency revealed that in 2020 and 2021, Imagination’s intellectual property and key assets were quietly funneled to Chinese GPU companies through “unusual and undisclosed knowledge-sharing agreements”. Two of the recipients, Moore Threads and Biren Technology, were sanctioned by the US in 2023 for their ties to China’s military-industrial complex. In this way, a key British technological asset was effectively dismantled, its innovations repurposed to advance the ambitions of the CCP. The British Government had either gravely underestimated the strategic intent of Chinese leaders — or it had simply been outmaneuvered.

This was just another step in the CCP’s broader strategy. In 2014, Beijing released plans to position China’s semiconductor ecosystem as a global leader by 2030, backed by a $150 billion National Integrated Circuit Fund to advance cutting-edge research and cultivate “national champions”. A year later, Made in China 2025 introduced the bold target of producing 70% of semiconductors domestically by 2025. These policies were reinforced in 2016 by the Innovation-driven Development Strategy, which funneled unprecedented governmental resources into research, talent cultivation, and infrastructure for China’s high-tech industrial ecosystem.

By 2017, Beijing’s semiconductor ambitions were already well-advanced — and raising alarm among Britain’s allies. It was becoming clear that China was executing a disciplined whole-of-state strategy to “leapfrog” key stages of semiconductor development, leveraging state funding and systematically extracting technology from foreign companies through acquisitions, joint ventures, and knowledge-transfer agreements. State-linked entities, including China Reform, played a key role in absorbing critical expertise into the country’s domestic ecosystem — securing intellectual property through licensing deals, embedding Chinese engineers into overseas R&D teams, and orchestrating takeovers of foreign semiconductor firms, including Imagination.

Shortly before Imagination Technologies’ sale, the US moved decisively to block Canyon Bridge from acquiring an American semiconductor firm, citing national security risks tied to Beijing’s industrial policy and the need to protect such critical technology. Britain, however, failed to shield Imagination, appearing blind to Washington’s caution. Not only did it ignore the emerging centrality of semiconductors in great power competition, but it overlooked the patterns of logic behind the CCP’s moves.

The CCP’s industrial, technological, and geopolitical goals are all situated within an ideational framework: Xi Jinping’s China Dream. This vision drives the CCP’s pursuit of strategic aims, guiding China’s transformation into a prosperous, technologically sovereign, and globally dominant superpower by 2050. Central to Xi’s Dream is the principle of technological “self-reliance”, aimed at reducing dependence on foreign technology, securing supply chain control, and establishing leadership in critical sectors, including semiconductors. With ideological clarity and strategic patience, China is steadily realizing decades-long ambitions for national rejuvenation, exploiting the disarray and short-termist thinking of less cohesive nations.

The failure to shield Imagination is not an anomaly, but a symptom of Britain’s deeper strategic paralysis. The January 2025 Commons debate which followed Rachel Reeves’s visit to Beijing provided a glimpse into Britain’s ongoing dysfunction. It was a performance which, if I were a Chinese strategist tasked with formulating UK policy, I would watch gleefully with my colleagues as we sipped Maotai and munched peanuts. The backdrop of the debate was Labour’s decision to resume economic dialogue with Beijing prior to publishing its promised and long-delayed China audit — a critical step in assessing the range of risks, opportunities and priorities in this complex relationship. Amid Reeves’s incomprehensible celebration of having secured £600 million “of tangible benefit for British businesses” (a figure akin to pennies found down the back of Beijing’s sofa), the debate descended into jeering and partisan mud-slinging, devoid of both cross-party solidarity and a sense of Britain’s long-term national interest.

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The fragmentation exposed during the debate reflects an underlying malaise: Britain has yet to establish a coherent hierarchy of values to guide its China policy. Parliament is fractured along ideological, strategic, and even regional lines, and Government departments engaging with China are split too. The Department for Business and Trade prioritizes economic ties, while GCHQ and MI5 warn of escalating security threats and the Foreign Office grapples to balance diplomacy with the defense of human rights and rule of law. Such ideological incoherence leads to siloed decision-making and mixed messaging. Whitehall’s fragmentation is further exacerbated by private interests which, in the absence of a clear overarching framework, can sway policy in directions that undermine Britain’s national security. The role of Mandelson’s lobbying firm in the Imagination fiasco illustrates how unreconciled agendas — whether between departments or state and private actors — breed strategic incoherence. China’s geopolitical rise is too important for Britain to proceed divided.

Should economic growth outweigh national security considerations? Can Britain credibly champion universal principles such as human rights and the rule of law while deepening ties with a regime which views them as existential threats to its own survival? Such questions are exceedingly complex and remain unanswered, as the Government has yet to articulate a clear vision for its relationship with Beijing — nor how its China policy will fit within Britain’s broader ambitions in the decades to come.

Keir Starmer is reportedly planning a trip to Beijing later this year, which would make him the first UK prime minister to visit in more than seven years. He has promised a “consistent, durable, respectful” relationship with China. Yet consistency and durability will be impossible in the absence of a unified, supra-partisan national strategy.

Without a long-term vision, the UK will continue to forfeit tools of power and credibility needed to remain influential in the 21st century. The case of Imagination Technologies illustrates the stakes: Britain is ill-prepared to confront a competitor that not only commands vast scale and resources, but which also thinks and plans in decades. In a world increasingly shaped by China’s ambitions, Britain must conjure a unified vision — or else risk continued erosion of its technological advantage and credibility as a global power.

When news of DeepSeek’s triumph hit America, the markets descended into pandemonium. In a day, hundreds of millions of dollars were wiped off American technology stocks, with Nvidia leading the fall. Washington had restricted the sale of highly complex chips like Nvidia’s to Chinese companies in the hope of stunting their AI advances — and yet Chinese developers had succeeded even without them.

The naysayers soon piled in. American AI executives, aware that they had been brutally shown up, belittled DeepSeek’s advances. Cold warriors accused DeepSeek of ripping off Western research, pointing to the fact that its model appeared to “think” it was ChatGPT (for which there is a perfectly reasonable explanation), as well as lambasting R1’s reluctance to discuss political subjects that are taboo in China, such as the Tiananmen Square massacre.

They were all missing the point. This was not a fluke, nor the result of foul play, but a show of China’s engineering ingenuity. The real revolution lay in DeepSeek’s willingness to go “open source”. Unlike OpenAI’s products, any designer can look under the hood of a DeepSeek AI model to see how it works. DeepSeek has even released a detailed scientific paper explaining how it designed R1. Western coders are now busy remaking its model, independently and from scratch, using information released to the public.

Another extraordinary aspect of DeepSeek is that its models, once trained, require very little computing power to use. In the industry, this is called “inference”. Up until now, AI companies have tended to rely on vast data centers — energy-hungry buildings humming with interconnected computers — to run their AI models. A company will license out its AI model to other companies — a bank, let’s say, that wants to create a chatbot to field customer questions. For a fee, that bank can then send questions to the data center, where the AI model will process the questions and send back answers. That’s why you need internet connection to use ChatGPT.

DeepSeek works differently. Its free, open-source model can be installed wholesale onto a (slightly specialized) personal computer. A “distilled” or simplified (that is, still as adept at reasoning if not as knowledgeable) version of DeepSeek’s model can then be used and edited offline, for no extra cost. This is a colossal development. It means that any Chinese user wishing to discuss Tiananmen Square would simply need to download DeepSeek onto an offline computer, without fear of a CCP hack, and edit the model. Voilà: you’ll have permanent access to a high-performance AI that will talk to you about any heretical subject you like.

Why would a Chinese company share its secrets in the middle of a global tech race? From DeepSeek’s perspective, there may be a great advantage to remaining open source. Open-source technologies create communities of mutual benefit and learning that benefit everyone involved. In the world of cybersecurity, for example, there is a vigorous and partly open community of cyber-defense analysts all trying to locate, publicize and eventually “patch” up weak points in hardware and software. In such a scenario, there is advantage in collaboration.

Like any community, an open-source community is ruled by hierarchies. A company at the leading edge of such a network is likely to attract collaborators, and gain trust and credit. Since DeepSeek published its models, it has been contacted by dozens of leading AI researchers and companies in the US and China. It will now be busy making powerful new friends, and discussing new techniques. If it can build quickly on its successes, DeepSeek will gain much from sharing its research.

Having cottoned on to this approach, American companies are now scrambling to design their own open-source models. It looks like a new paradigm and has been compared to the release of the first open-source internet browser.

American tech leaders are still right to be alarmed. DeepSeek didn’t come out of nowhere, but has emerged from a vast ecosystem of Chinese tech talent. How many Westerners have heard of CATL, Hesai, DJI, SMIC, Oppo, Pony.ai, Zhiyuan? — among the world’s best companies in robotics, autonomous driving, drones, lidar, AI and battery technology. DeepSeek is really only the tip of the iceberg — one which the US is about to crash straight into.

For one thing, Huawei makes chips now — and it has been on the warpath ever since the US had one of its leading executives arrested in 2018 and then tried to destroy its phones and network technology business. Given DeepSeek’s very low inference costs, it doesn’t depend on sanctioned Nvidia ultra-advanced chips to run. It can work with cheaper Huawei chips — which are anyway growing more sophisticated every year.

Nor is DeepSeek the only up-and-coming Chinese AI company. Other impressive Chinese models have been released recently, such as that of sanctioned firm iFlytek, or Alibaba. All of this has taken place in spite of America’s best efforts to prevent or slow down the rise of Chinese technology. Some have even suggested that American sanctions helped Chinese chipmakers — since sanctions made it profitable to innovate domestic chips instead of just buying American ones.

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A clear narrative is emerging here. The Chinese, quite apart from IP theft, are bloody good at technology. They are not going to stop innovating. America can’t stop them, and they are well past merely “catching up”.

How did it all go wrong for the West? Steve Hsu, an American physicist, argues that China is eclipsing America when it comes to cultivating human capital in the sciences, math and engineering. Within a couple of generations, malnutrition (which stunts brain development) has been all but eliminated in China; the majority of children now graduate from high school, and roughly 60% go on to university. Nearly a third of students study STEM subjects at university, compared to just 3% a generation ago. And China’s best universities are now ranked as highly as those in the West.

Due to the size of China’s population, these reforms have left the country with a much larger, and still growing, pool of very smart and highly STEM-educated citizens. This pool is much larger than in India, whose comparable population continues to be blighted by illiteracy, malnutrition, and a lack of educational opportunity. And the long era of Chinese brain drain is finally over: more and more, Chinese STEM graduates remain in or return to China rather than trying their luck in the West, their prospects at home bolstered by a dynamic economy and improved standards of living. In fact, the humiliating trend has begun to reverse, with the annual number of scientists leaving the US for China increasing by a factor of five or so in the last 15 years.

Critically, and unlike in the West, China’s STEM graduates gravitate towards jobs in engineering, design, technology, and basic research rather than in finance. DeepSeek itself illustrates the precarity of China’s finance industry — it grew out of a quantitative investment fund that was hit eight months ago by a government crackdown on computer-driven high-speed trading.

Might an aversion to finance be a blessing for China? Steve Hsu likes to quote what billionaire investor Charlie Munger said of America’s elite culture: “I regard the amount of brainpower going into money management as a national scandal. […] We have armies of people with advanced degrees in physics and math in various hedge funds and private-equity funds trying to outsmart the market. […] It’s crazy to have incentives that drive your most intelligent people into a very sophisticated gaming system.”

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Not only are Chinese keeping more AI-ready engineers and designers, but theirs have a massive industrial ecosystem to play with — a contrast with deindustrialized America. In April 2022, Sun Ninghai, the director of the Institute of Computing Technology at China’ Academy of Sciences, gave a lecture to the 200-odd strong standing committee of China’s National People’s Congress, which comprises some very senior leaders. He warned that China must not go down America’s path of “contempt for the real economy” and diversion of IT talent into the “virtual economy” — consisting of virtual reality, the meta-universe, blockchain, and the like.

Sun’s argument is a persuasive one. America has neglected making useful physical goods, he says, with the percentage of jobs in manufacturing falling dramatically since 2000. He argues that far too much intellectual energy has gone into the false economy of financial speculation or virtual tech that doesn’t produce tangible goods. Google and Facebook’s revenue comes mostly from advertisements (77% and 98% respectively), while Amazon’s revenue comes from selling Chinese goods, which make up 71% of their products.

By contrast, Sun urged China to apply its AI innovation to the “real economy”. This means integrating AI algorithms into physical mechanisms across industry. The idea is to build AI innovation into China’s successful manufacturing and export-based model, bolstering the government’s existing efforts to surpass America technologically in as many industrial categories and supply chains as possible.

For China’s innovations are already coming in thick and fast. First there was Huawei’s superior 5G, then the PLA’s world-leading hypersonic missiles, which stunned the US military establishment. The story some media missed last week was the discovery of a vast and apparently secret experimental fusion research center in Sichuan province. If China could invent cold fusion, a means of generating energy by joining atoms together, that would be the ultimate Sputnik moment.

None of this is going to stop. We should expect more stunning advances from Chinese science and technology in the coming months and years. And unless the West begins to nurture and direct STEM talent more effectively, it risks falling behind. We must ensure more incentives for ultra-bright math graduates; the science faculties at top institutions must be insulated from campus culture wars; policymakers must listen more to scientists and technologists. But, above all, the West must start making things again, fostering the physical and intellectual proximity between industry and research that breeds real advances. We need to get our heads out of the cloud, and into the real world. For the Chinese have entered their era of innovation.

***

The views expressed here are personal, not those of UKCT.

Known as DeepSeek, this open-source model was released to the entire world for free, with pretty much anyone able to run their own DeepSeek server. That’s surely a positive development in the tech landscape, yet, as the news hit, it caused shock, then consternation, then a growing sense of panic. The certainties of the tech oligarchy were being shaken. The floor had fallen out of the bottom of their new economic model. There’s no such thing as a free lunch, so the saying goes — but in a supreme bit of irony, the Chinese, by releasing a product that was in fact free, caused one of the most expensive stock market disasters in living memory.

Nvidia, which up until recently was mostly known for making graphics cards for computer gaming enthusiasts, lost a whopping $600 billion dollars in market capitalization when the market opened on Monday. That’s the single biggest loss in human history. Nor was it the only company to suffer: stock market value far in excess of the entire Canadian economy was swiftly obliterated, all on the news that someone in China had managed to invent a slightly better chatbot. No wonder Sam Altman, CEO of OpenAI, was miffed that China had copied his homework.

In truth, though, the tech market’s travails are only one piece in a grander geopolitical chess game. One of the reasons that AI has come to dominate so much of Western discussion is that, in the minds of many, it represented the last, best field where the West (and America especially) maintained a big lead over China. Insecurity over China’s rising industrial might can be found in every corner of Washington. With America slipping in so many other areas of this new cold war, AI was supposed to be their one definite trump card.

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Several factors helped build this narrative of Western AI dominance. To begin with, much of the technology and IP involved has traditionally been found inside the West, with China having to play catchup. In this regard, AI actually represents a sort of technological rearguard. After attempts to limit Chinese semiconductor manufacturing, and prevent them from dominating the telecom and 5G markets, production of graphics processing units (GPUs) remained an area where the US and its allies had a significant lead. In the final days of the Biden administration, then, America imposed severe export restrictions on these GPUs, conscious too that they’re the backbone of AI processing.

The problem, as it turns out, was that these limitations only made China stronger. DeepSeek’s main innovation is that it’s made incredible strides in economizing on GPUs and processing power, producing equivalent results to Western AI models at a fraction of the cost. This innovation, while in theory good for everyone, not only serves to level the playing field, but also undermines the West’s idea of how the future of AI would look: massive, hugely expensive data centers, soaking up more power than a small city, costing so much that only a few giants could afford to enter the market.

The other advantage the West was supposed to have here was innovation. In the common think-tank tale, regularly repeated KKKK, China was just too rigid, too controlled, too lacking in free thinking to ever invent something truly revolutionary. The Chinese could copy us, the story went, but true innovation was supposedly beyond their grasp.

With DeepSeek, that narrative is dead. KKKK.

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And if this model presages further Chinese transformations from KKKK to KKKK, it isn’t only in the realm of geopolitics that the new President has cause to worry. For Donald Trump, the launch of DeepSeek comes at an important time domestically. With the silicon valley billionaires now inside his tent, Trump has made a colossal bet on this de facto oligarchy, in the hope that they represented the economic and technological future of the country.

More to the point, Trump has made a point of embracing the promise that AI can save America, recently launching, with Altman, a new artificial intelligence firm. Stargate   was meant to unify America’s biggest tech giants behind a $500 billion AI infrastructure investment program — precisely the kind of infrastructure that DeepSeek now threatens to make completely redundant. Trump’s alliance with other tech giants, notably Elon Musk, is also well known, even as the chief executive has filled important bureaucrat posts with figures from SpaceX and Palantir. 

While that bet now looks far less safe, it also exposes another risky economic gamble. For decades, America’s industrialists have been increasingly loath to invest in factories, job training, or expanded production: it is simply more lucrative to plow revenues back into the stock market, buying up stocks and bolstering share prices. Certainly, that’s clear from the numbers. KKKK. And right now, a small number of tech companies — called the Magnificent Seven — make up a massive share of the entire US stock market, with valuations that are clearly indicative of a very serious stock market bubble. If that bubble bursts, the fallout risks derailing the entirety of Trump’s second term in office.

To understand America’s challenge here, compare it to one of its rivals. Russia’s Gazprom has half a million workers and countless facilities across the world. Nvidia, by contrast, has less than 30,000 employees. In theory, Nvidia is more valuable than Gazprom — not because of the value of its factories or staff, but because everyone believed it would become valuable sometime in the future. Looking to China, meanwhile, NVIDIA alone is worth over half the entire Shanghai stock exchange. Again, this “value” is only down to future expectations, derived from little more than hopes and dreams. 

What can Trump do? Probably not much. The nature of stock-market bubbles is that they eventually pop. More generally, though, AI represents only the latest in a failed defensive line held against China. America tried to go after Huawei, and though sanctions and export controls did serious damage to the company initially, the telecom giant adapted. Rather than crushing the Chinese telecom sector, indeed, America’s attempts to destroy the free trade system has only triggered more technological innovation. Semiconductors tell a similar tale, with China developing its own domestic chip industry at the expense of Taiwan. America keeps on getting beaten at its own game, only to stamp its foot in the unfairness of it.

But attempting to hold off the threat posed by a nation of 1.4 billion people, with an ancient culture and millions of Stem graduates, was always likely to fail. The problem facing the West today is not that it lacks the tools to “win” — it clearly does, given the ambition of its innovation — but that no one knows when the game is won. So all Washington’s political and economic energy is being channeled into increasingly expensive and desperate moonshots. AI was meant to be the trump card — until one day it was cloned.

In the end, of course, none of this is actually about AI itself. No matter how useful the technology, that’s distinct from the irrefutable logic of America’s financial bubble, a logic now more stark than before the Great Recession. If, or rather when, this bubble bursts, the political and social fallout will be immense. Obviously, the tech oligarchs are lashing out petulantly: China steals technology; China can’t really innovate; China is somehow “cheating” in the tech race — failing to see the irony that they too harvest data to build and improve their products. Essentially, though, the West’s problems have very little to do with Beijing, and more to do with our own systemic imbalances. 

In tying his fate so tightly to the tech sector, the President, has made himself and the country he leads, hostage to a literally huge fortune. Consider Nvidia. Even after its recent troubles, the firm sits on a market capitalization about the same size as the entire UK. Is this situation actually sustainable? No, it most definitely isn’t.