The Money Trails
Posts
DeepSeek and AI Arms Race: Is It a Warning for the US?

DeepSeek and AI Arms Race: Is It a Warning for the US?

How Black Markets of Banned Chips Created Deepseek

Kartik Vyas
January 30, 2025

Sponsored by

‎Stay Fully Informed with Straight Arrow News | SAN

In a time of media bias and mistrust, Straight Arrow News serves you the truth via fact-based reporting and hearing from both sides. Tap the banner now to download the 100% FREE app so you can stay fully informed.

DeepSeek, a little-known Chinese AI startup shocked the world by releasing an AI model that outperformed OpenAI’s GPT-4 while costing a fraction to develop. But behind this breakthrough lies a dark reality: allegations of using smuggled U.S.-sanctioned Nvidia chips.

This isn’t just about one company’s rise. It’s about an AI arms race between the U.S. and China, fueled by a thriving black market for advanced chips.

This might be AI’s Sputnik moment — where global power dynamics and political leadership are changed forever. Let’s dig deep into the DeepSeek chaos!

THE MONEY TRAIL 🔍
DeepSeek: The Sputnik Moment of AI?

Much like the Soviet Union’s launch of Sputnik in 1957 which kicked off the space race, Deepskeet-R1’s launch is a wake-up call for the U.S. The model isn’t just competitive, it’s dominating. Here’s why:

The performance matches or outperforms GPT-4 in coding and mathematical reasoning tasks.
Developed for just $6 million—pocket changed compared to U.S. firms burning billions.
DeepSeek claims it used 2,048 Nvidia H800 chips for training, but the black market tells a darker story (more on that later).
It’s open-source, meaning anyone can refine it.

While the U.S. was slapping chip sanctions, China was building DeepSeek and now we’re staring at an AI cold war.

DeepSeek vs Others

The AI Chips Black Market: A Shadowy Network

U.S. export controls were supposed to stop China from accessing advanced AI chips. Instead, they created a $20,000-per-chip black market. Here’s how:

Smugglers use shell companies, transit points in Southeast Asia, and even individual couriers to transport restricted chips into China.
Smuggled Nvidia H100 chips sell for up to $45,000 each in China — 50% more than their legal price elsewhere
DeepSeek claims it used legally obtained Nvidia H800 chips.
But, reports suggest it may have accessed 50,000 restricted H100 GPUs through the black market.

DEVELOPING: Chinese entrepreneur boasts receipt of 200 NVIDIA H200 GPUs in Beijing despite US export ban, explains how he circumvents export ban 🧵
— bone (@boneGPT)
8:57 PM • Jan 27, 2025

The AI Arms Race: U.S. vs China

DeepSeek’s rise has intensified the AI arms race, with far-reaching implications:

DeepSeek R1’s launch caused $1 trillion in market losses for U.S. tech giants like Nvidia and Microsoft
Advanced AI models could be used for military applications, cyber warfare, and surveillance, posing a direct threat to U.S. security
This AI arms race may lead to geopolitical fragmentation and more polarizing international relations - nations aligning with either U.S. or China-led tech ecosystems.

How a US/China superintelligence arms race will play out:
“The CCP is going to have an all-out effort to infiltrate American AI labs.
Thousands of people, the full force of the Ministry of State Security.
There's an enormous incentive for a first strike.”
@leopoldasch
— Dwarkesh Patel (@dwarkesh_sp)
5:22 PM • Jun 4, 2024

The Human Cost: How This Impacts You

This AI arms race isn’t just a fight between governments - its ripple effects could touch us all:

We could see a more rapid adoption of AI, leading to job losses worldwide.
Chinese AI models, including DeepSeek, are governed by Beijing’s data laws. This means your data isn’t safe.
Advanced AI tools may be accessible to some nations but leave others further behind.

🚨 To all those excited about DeepSeek:
1. I hope you've read its Terms of Service and Privacy Policy.
2. I hope you're familiar with the laws of the People's Republic of China.
3. I don't think it will last long in the U.S.
— Luiza Jarovsky (@LuizaJarovsky)
6:44 PM • Jan 27, 2025

Our Take

DeepSeek isn’t just another AI success story. It’s a case study of how global restrictions can fail when black markets thrive.

This again proves what we’re trying to do with our new direction — we’re now in a world where power does not necessarily come from innovation or governmental control, but from who controls the pipelines for chips, data, and ultimately the financial muscles.

COMMUNITY🤝

Is the AI arms race between the U.S. and China accelerating progress or putting the world at risk?

Last Week’s Poll: Should a sitting president be allowed to profit from cryptocurrencies while in office?

“They shouldn’t for the same reasons we shouldn’t let congress play the stock market, as they both have the ability to influence these markets with laws and subsidies before the public is even aware of it ”

M. Ramos

“I think getting money legally and openly from crypto is far better than how so many politicians are seemingly skimming our taxpayer dollars, blatantly stealing from the US people and the government. Or selling your stocks right before something happens (the Pelosis come to mind) ”

F. Shelton

MONEY FLOWS 🌍

Purdue Pharma and the Sackler family have agreed to pay more than $7 billion to settle claims over their role in fueling the U.S. opioid epidemic. This settlement is the latest chapter in a legal battle over the company’s widely prescribed painkiller, OxyContin.
A group of lawmakers is pushing a bill that would ban China from purchasing any land in the United States. The “Not One More Inch or Acre Act” is led by Republican Sens. Tom Cotton of Arkansas, Kevin Cramer of North Dakota, and Katie Britt of Alabama.

To get more facts and unbiased stories about money, power, and corruption behind the most important societal issues, download the Free Straight Arrow News app now.