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China’s shocking DeepSeek AI pops US Big Tech monopoly bubble

Chinese AI company DeepSeek shocked the West with a groundbreaking open-source artificial intelligence model that beats huge Silicon Valley Big Tech monopolies. Is the US stock market bubble popping?

China pops US AI bubble

China is making enormous progress in the development of artificial intelligence technology, and it has set off a political and economic earthquake in the West.

The stocks of US Big Tech corporations crashed on January 27, losing hundreds of billions of dollars in market capitalization over the span of just a few hours, on the news that a small Chinese company called DeepSeek had created a new cutting-edge AI model, which was released for free to the public.

The UK’s leading newspaper The Guardian described DeepSeek as “the biggest threat to Silicon Valley’s hegemony”.

This is widely being dubbed a “Sputnik moment” — a reference to 1957, during Cold War One, when the Soviet Union launched the first satellite in outer space, called Sputnik 1.

The United States had significantly underestimated the technological capabilities of the former Soviet Union then, just as the US has vastly underestimated the technological capabilities of China today.

What is remarkable is that this small Chinese company was able to develop a large language model (LLM) that is even better than those created by the US mega-corporation OpenAI, which is half owned by Microsoft, one of the biggest corporate monopolies on Earth.

In order to develop its groundbreaking R1 model, DeepSeek reportedly spent around $6 million.

That would be a mere rounding error in Silicon Valley. US Big Tech corporations have plowed roughly $1 trillion into developing artificial intelligence in the past decade. In 2024 alone, Silicon Valley capital expenditure on AI was $197 billion, and it is expected to be $234 billion in 2025.

When OpenAI announced in December 2024 that it had introduced ChatGPT Pro, it was charging $200 per month to use the application.

Compare that to the DeepSeek R1 model, which is open source. Not only is their app free to use, but you can download the source code and run it locally on your computer. It can even be used without the internet.

Even better, DeepSeek’s LLM model only requires a tiny fraction of the overall energy and computing power needed by OpenAI’s models. In short, it is cheaper to run, better for the environment, and accessible to the entire world.

This is why the week it was launched, in late January, DeepSeek became the number one app in the United States, overtaking ChatGPT.

Alarm bells immediately sounded in Washington. US officials claimed the app is a supposed “national security” threat — their favorite excuse to justify imposing restrictions on Silicon Valley’s Chinese competitors.

The US Navy promptly banned DeepSeek, citing “potential security and ethical concerns”.

Starting in Donald Trump’s first term, and continuing through the Joe Biden administration, the US government has waged a brutal technology war and economic war against China.

Washington hit China with sanctions, tariffs, and semiconductor restrictions, seeking to block its principal geopolitical rival from getting access to top-of-the-line Nvidia chips that are needed for AI research — or at least that they thought were needed.

DeepSeek has shown that the most cutting edge chips are not necessary if you have clever researchers who are motivated to innovate.

This realization unleashed pandemonium in the US stock market.

In just one day, Nvidia shares fell 17%, losing $600 billion in market cap. This was the largest one-day drop in the history of the US stock market.

This was a blow to global investor confidence in the US equity market and the idea of so-called “American exceptionalism”, which has been consistently pushed by the Western financial press.

Some financial analysts are now publicly wondering if this could be the beginning of the popping of the massive bubble in the US stock market.

A look at the Buffett Indicator, which measures the market capitalization of publicly traded stocks in the US in comparison to GDP, shows that it is at the highest level ever recorded, at more than 200% of GDP. This is significantly higher than it was at the peak of the Dot-com bubble, which burst in 2000.

buffett indicator market cap GDP January 2025

Another common metric, the price-to-earnings ratio, or P/E ratio, which compares the inflation-adjusted earnings of US publicly traded companies to the price of their stocks, similarly demonstrates that they are very frothy — at the highest levels since the Dot-com bubble, and even higher than they were in 1929, at the peak of the stock market mania which crashed and contributed to the Great Depression of the 1930s.

PE Ratio S&P 500 January 2025

This is why even Jamie Dimon, the CEO of the largest US bank, JPMorgan Chase, warned at the World Economic Forum in Davos in January that the US stock market is “inflated”.

What is even more concerning is how extremely concentrated the US equity market is.

Much of the growth in recent years in the S&P 500, the index of the 500 largest publicly traded companies on US stock exchanges, has been driven by a small handful of Big Tech corporations, which are known as the Magnificent 7, or the Mag7. These are Apple, Microsoft, Nvidia, Amazon, Meta, Tesla, and Alphabet.

Together, those seven Big Tech corporations made up a third of the weight of the entire S&P 500, as of December 2024.

Moreover, those same seven companies made up nearly a quarter of the weight of the MSCI World Index.

big tech mag7 top 10 companies S&P 500 MSCI December 2024

There are trillions of dollars from investors all around the world that have flooded into the stocks of these US Big Tech monopolies under the assumption that they have no real competition, that they’re the only game in town.

However, China has shown that there are competitors, and they are challenging the technological chokehold that Silicon Valley has on most of the world.

Given how much the US economy has been financialized in the neoliberal era, and how much depends on continuing to inflate asset prices, a crisis could be on the horizon if the AI bubble pops.

9 Comments

9 Comments

  1. Eric Arthur Blair

    2025-01-29 at 15:58

    Complementary analyses from Yanis Varoufakis
    https://youtu.be/aotKmC3FHn4?si=sUuocCl-x-x_BHjr
    and Danny Haiphong
    https://youtu.be/xjcpvWBV9dw?si=Rq4SwYg-pO5CDZde

    • Eric Arthur Blair

      2025-01-31 at 17:19

      Orwellianly named US company “Open” A.I., which cost billions of stockholders (AKA suckers) money to develop, is NOT open source, it is proprietary, it charges premium users heftily, yet it derives its output from harvesting the work from millions of people without paying them.
      Open A. I.’s CEO Sam Altman now complains, without evidence, that Deep Seek, which is TRULY open source, “stole” Open AI’s homework, then gave it to the world for free. They stole from a thief, how dare they!
      Comedian Lee Camp says that Altman is actually an A. I. fleshbot (the name Alt-man gives it away) whose head was replaced years ago, it is clearly now a prosthetic head.
      Anyway Marina Hyde gives her hilarious take on Altman’s self pitying whining. Boohoo.
      https://www.theguardian.com/commentisfree/2025/jan/31/tech-bros-deepseek-china-sam-altman-openai

  2. Eric Arthur Blair

    2025-01-29 at 16:03

    China may lead in several fields but lag waaaay behind the US in propaganda and mind control and skullduggery.
    Just look at Euro dumbass “leaders” who have screwed their own people to benefit the USA eg Oaf Schol who grinned like a fool as Biden boasted he would prevent Nordstream by any means, followed by the US blowing up the pipeline, followed by the US selling US LNG to the Germs at >6x the pipeline gas cost, followed by the US “inflation reduction act” to relocate Germy industries to the USA, followed by the ongoing economic collapse of the Germs.
    Also the cancellation of Romanian elections and banning the leading candidate because he was not a US puppet.
    Just two among scores of examples.
    Felon Musk salutes the US flag with gusto, sieg heil!!!

  3. JonnyJames

    2025-01-30 at 10:41

    Another great one from Ben. The de-regulated Ponzi racket of the so-called stock-market is on full display. It is remarkable when even Jamie Dimon says the market is “inflated”, but that is quite an understatement.

    Stock buybacks used to be illegal, this is but one form of institutional corruption rampant in our Ponzi racket, manipulated “markets”.

    Just a quick and dirty look at the S&P 500 index since the crash of 08 – it has quadrupled in “value”! Yet even the inflated “economic growth” (GDP etc.) numbers during the same period are a fraction of that. The “stock market” is in no way connected with productive economic activity, only corrupt Ponzi schemes and debt/margin leveraging.

    Financial imperialism means that the USD financial markets are “the only game in town” and the hedge fund/private equity parasites, banksters and oligarchs suck up all the wealth while the slowly empire crumbles. USD holders abroad repatriate the money and juice the markets further (as well as the value of the USD). Rinse and repeat until 99% the wealth and resources is controlled by the .01% oligarchy or the system collapses.

  4. Rubicon

    2025-01-30 at 16:11

    Ben Norton ALSO shows: “A look at the Buffett Indicator, which measures the market capitalization of publicly traded stocks in the US in comparison to GDP, shows that it is at the highest level ever recorded, at more than 200% of GDP. This is significantly higher than it was at the peak of the Dot-com bubble, which burst in 2000.”

    Even so, I have much confidence in what the Pros will do to alleviate the issue to ensure their Profits remain intact. It will be several millions of US citizens who will end up with the short stick. As always.

    • JonnyJames

      2025-01-31 at 10:29

      More like over a couple HUNDRED million get the short end: as wee see the bulk of the wealth is sucked up by the .01% oligarchy.

  5. Energieerhaltungssatz

    2025-01-30 at 17:25

    Direct links to the Offline versions of the “national security threat” DeepSeek R1, which Ben Norton mentions at 13:17 in the video:

    Overview of all available DeepSeek R1 models:
    https://huggingface.co/collections/deepseek-ai/deepseek-r1-678e1e131c0169c0bc89728d

    The files for the 685 Billion parameters versions:

    DeepSeek R1:
    https://huggingface.co/deepseek-ai/DeepSeek-R1/tree/main

    DeepSeek R1 Zero:
    https://huggingface.co/deepseek-ai/DeepSeek-R1-Zero/tree/main

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