DeepSeek's 'Sputnik Moment' Exposes Holes in US Chip Curbs

Deepseek and Microsoft logos are seen in this illustration taken, January 28, 2025. REUTERS/Dado Ruvic/Illustration
Deepseek and Microsoft logos are seen in this illustration taken, January 28, 2025. REUTERS/Dado Ruvic/Illustration
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DeepSeek's 'Sputnik Moment' Exposes Holes in US Chip Curbs

Deepseek and Microsoft logos are seen in this illustration taken, January 28, 2025. REUTERS/Dado Ruvic/Illustration
Deepseek and Microsoft logos are seen in this illustration taken, January 28, 2025. REUTERS/Dado Ruvic/Illustration

US export controls on high-tech chips may have inadvertently fueled the success of start-up DeepSeek's AI chatbot, sparking fears in Washington there could be little it can do to stop China in the push for global dominance in AI.

The firm, based in the eastern Chinese city of Hangzhou, has stunned investors and industry insiders with its R1 program, which can match its American competitors seemingly at a fraction of the cost.

That's despite a strict US regime prohibiting Chinese firms from accessing the kinds of advanced chips needed to power the massive learning models used to develop AI.

DeepSeek founder Liang Wenfeng has admitted the "embargo on high-end chips" has proved a major hurdle in its work.

But while the curbs have long aimed to ensure US tech dominance, analysts suggest they may have spurred the firm to develop clever ways to overcome them.

The company has said it used the less-advanced H800 chips -- permitted for export to China until late 2023 -- to power its large learning model.

"The constraints on China's access to chips forced the DeepSeek team to train more efficient models that could still be competitive without huge compute training costs," George Washington University's Jeffrey Ding told AFP.

The success of DeepSeek, he said, showed "US export controls are ineffective at preventing other countries from developing frontier models".

"History tells us it is impossible to bottle up a general-purpose technology like artificial intelligence."

DeepSeek is far from the first Chinese firm forced to innovate in this way: tech giant Huawei has roared back into profit in recent years after reorienting its business to address US sanctions.

But it is the first to spark such panic in Silicon Valley and Washington.

Venture capitalist Marc Andreessen described it as a "Sputnik moment" -- a reference to the Soviet satellite launch that exposed the yawning technology gap between the United States and its primary geopolitical adversary.

Fraction of the cost

For years many had assumed US supremacy in AI was a given, with the field dominated by big Silicon Valley names like OpenAI and Facebook-parent Meta.

While China has invested millions and vowed to be the world leader in AI technology by 2030, its offerings were hardly enough to raise hackles across the Pacific.

Tech giant Baidu's attempt at matching ChatGPT, Ernie Bot, failed to impress on release -- seemingly confirming views among many that Beijing's stifling regulatory environment for big tech would prevent any real innovation.

That was combined with a tough regime, spearheaded by the administration of Joe Biden, aimed at limiting Chinese purchases of the high-tech chips needed to power AI large language models.

But DeepSeek has blown many of those ideas out of the water.

"It's overturned the long-held assumptions that many had about the computation power, the data processing that's required to innovate," Samm Sacks, a Research Scholar in Law and Senior Fellow at Yale Law School's Paul Tsai China Center, told AFP.

"And so the question is can we get cutting-edge AI at a fraction of the cost and a fraction of the computation?"

While DeepSeek's model emphasized cost-cutting and efficiency, American policy towards AI has long been based on assumptions about scale.

"Throw more and more computing power and performance at the problem to achieve better and better performance," according to George Washington University's Ding.

That's the central idea behind President Donald Trump's Stargate venture, a $500 billion initiative to build infrastructure for artificial intelligence led by Japanese giant SoftBank and ChatGPT-maker OpenAI.

But the success of DeepSeek's R1 chatbot -- which its developers claim was built for just $5.6 million -- suggest innovation can come much cheaper.

Some urge caution, stressing the firm's cost-saving measures might not be quite so innovative.

"DeepSeek V3's training costs, while competitive, fall within historical efficiency trends," Lennart Heim, an associate information scientist at the RAND Corporation, told AFP, referring to R1's previous iteration.

"AI models have consistently become cheaper to train over time -- this isn't new," he explained.

"We also don't see the full cost picture of infrastructure, research, and development."

'Wake-up call'

Nevertheless, Trump has described DeepSeek as a "wake-up call" for Silicon Valley that they needed to be "laser-focused on competing to win".

Former US Representative Mark Kennedy told AFP that DeepSeek's success "does not undermine the effectiveness of export controls moving forward".

Washington could choose to fire the next salvo by "expanding restrictions on AI chips" and increased oversight of precisely what technology Chinese firms can access, he added.

But it could also look to bolster its own industry, said Kennedy, who is now Director of the Wilson Center's Wahba Institute for Strategic Competition.

"Given the limitations of purely defensive measures, it may also ramp up domestic AI investment, strengthen alliances, and refine policies to ensure it maintains leadership without unintentionally driving more nations toward China's AI ecosystem," he said.

Rebecca Arcesati, an analyst at Mercator Institute for China Studies (MERICS), told AFP "the very real fear of falling behind China could now catalyze that push".



Microsoft Creates Chip It Says Shows Quantum Computers Are ‘Years, Not Decades’ Away

Microsoft's Majorana 1 quantum computing chip is pictured in this undated handout photo obtained by Reuters on February 19, 2025. (Courtesy of Microsoft/Handout via Reuters)
Microsoft's Majorana 1 quantum computing chip is pictured in this undated handout photo obtained by Reuters on February 19, 2025. (Courtesy of Microsoft/Handout via Reuters)
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Microsoft Creates Chip It Says Shows Quantum Computers Are ‘Years, Not Decades’ Away

Microsoft's Majorana 1 quantum computing chip is pictured in this undated handout photo obtained by Reuters on February 19, 2025. (Courtesy of Microsoft/Handout via Reuters)
Microsoft's Majorana 1 quantum computing chip is pictured in this undated handout photo obtained by Reuters on February 19, 2025. (Courtesy of Microsoft/Handout via Reuters)

Microsoft on Wednesday unveiled a new chip that it said showed quantum computing is "years, not decades" away, joining Google and IBM in predicting that a fundamental change in computing technology is much closer than recently believed.

Quantum computing holds the promise of carrying out calculations that would take today's systems millions of years and could unlock discoveries in medicine, chemistry and many other fields where near-infinite seas of possible combinations of molecules confound classical computers.

Quantum computers also hold the danger of upending today's cybersecurity systems, where most encryption relies on the assumption that it would take too long to brute force gain access.

The biggest challenge of quantum computers is that a fundamental building block called a qubit, which is similar to a bit in classical computing, is incredibly fast but also extremely difficult to control and prone to errors.

Microsoft said the Majorana 1 chip it has developed is less prone to those errors than rivals and provided as evidence a scientific paper set to be published in academic journal Nature.

When useful quantum computers will arrive has become a topic of debate in the upper echelons of the tech industry. Nvidia CEO Jensen Huang said last month that the technology was two decades away from overtaking his company's chips, the workhorses of artificial intelligence, reflecting broad skepticism.

Those remarks prompted Google, which last year showed off its own new quantum chip, to say that commercial quantum computing applications are only five years away. IBM has said large-scale quantum computers will be online by 2033.

Microsoft's Majorana 1 has been in the works for nearly two decades and relies on a subatomic particle called the Majorana fermion whose existence was first theorized in the 1930s. That particle has properties that make it less prone to the errors that plague quantum computers, but it has been hard for physicists to find and control.

Microsoft said it created the Majorana 1 chip with indium arsenide and aluminum. The device uses a superconducting nanowire to observe the particles and can be controlled with standard computing equipment.

The chip Microsoft revealed Wednesday has far fewer qubits than rival chips from Google and IBM, but Microsoft believes that far fewer of its Majorana-based qubits will be needed to make useful computers because the error rates are lower.

Microsoft did not give a timeline for when the chip would be scaled up to create quantum computers that can outstrip today's machines, but the company said in a blog post that point was "years, not decades" away.

Jason Zander, the Microsoft executive vice president who oversees the company's long-term strategic bets, described Majorana 1 as a "high risk, high reward" strategy.

The chip was fabricated at Microsoft labs in Washington state and Denmark.

"The hardest part has been solving the physics. There is no textbook for this, and we had to invent it," Zander said in an interview with Reuters. "We literally have invented the ability to go create this thing, atom by atom, layer by layer."

Philip Kim, a professor of physics at Harvard University who was not involved in Microsoft's research, said that Majorana fermions have been a hot topic among physicists for decades and called Microsoft's work an "exciting development" that put the company at the forefront of quantum research.

He also said that Microsoft's use of a hybrid between traditional semiconductors and exotic superconductors appeared to be a good route toward chips that can be scaled up into more powerful chips.

"Although there's no demonstration (of this scaling up) yet, what they are doing is really successful," Kim said.