The AI Enemy From Within
If the U.S. loses the AI race, it won't be because of China.
The release of DeepSeek R1 a few weeks ago showed the world how fragile the US leadership in AI development really is. Before that, nobody even questioned the dominance of firms such as OpenAI, Anthropic, and xAI. Remember, in June 2023, Sam Altman was discouraging Indians from even entertaining the idea of building their own LLMs. Whether that was simply a business tactic to delay the emergence of serious competition or Altman’s genuine belief that OpenAI was so far ahead — fortified by its GPU-rich status— that no one could catch up remains an open question. The truth is likely a mix of both.
DeepSeek R1 was a wake up call that forced the US to react. It shattered the idea that OpenAI and the US AI giants had some kind of proprietary advanced knowledge that made it almost impossible to catch up with them. It shattered the three moats OpenAI and co had been trying to consolidate in the past two years: compute, IP, and brand. How ? DeepSeek proved it was possible to catch up with OpenAI quite fast, and with less compute than previously thought. DeepSeek did it despite export controls on high end GPUs. DeepSeek did it despite OpenAI, Anthropic and co not publishing their research breakthroughs. And in a matter of days, DeepSeek’s brand gained huge popularity via their web and mobile apps. It looks like the real moat is the talent.
Narrative violations
Immediate reactions mostly came from OpenAI as its leadership at the top of the AI space was challenged by the impressive achievements of DeepSeek. Suddenly, to reclaim mindshare, OpenAI had to engage in a flurry of releases, including GPT-4o with scheduled tasks (a glorified reminder functionality), o3-mini and o3-mini-high available on ChatGPT (including the free tier), Deep Research, Operator, project Stargate ($500B investment pledge for AI infrastructure in the US), and the ability to read the reasoning traces of o3 models (in response to DeepSeek R1’s traces being available with no obfuscation).
Vladimir Ilyich Lenin famously said: “There are decades where nothing happens; and there are weeks where decades happen.” That was certainly true of the four weeks of January 2025 as far as the generative AI landscape is concerned.
In an AMA on Reddit, Sam Altman even went as far as to say OpenAI would make an effort to contribute more to Open Source initiatives, a stark reversal of the “proprietary” approach that allowed DeepSeek to claim the Open Source AI throne without much resistance by open sourcing DeepSeek V3 and R1. DeepSeek’s models effectively became the true “open AIs,” much to the satisfaction of huge swaths of the open source AI community.
Other reactions were not so constructive and revealed the shock in US tech cycles to realize they weren’t above everyone else as they initially thought. First there was disbelief about DeepSeek’s accomplishments. For some prominent US investors, DeepSeek was a CCP psyops, pointing out censorship in the chat app. Others doubted the veracity of the training budget communicated in DeepSeek R1’s paper, speculated that OpenAI’s secrets must have been leaked during San Francisco parties and that was the only way DeepSeek’s team could have known what to do (only US tech engineers can innovate don’t you know that?). Others accused DeepSeek of training on OpenAI’s outputs which would not be “fair use”. Coming from those who scraped all the internet without asking for consent, that last criticism was a bit ironic.
It was all cope, and understandably so. When you are so used to being at the top, realizing your position is fragile and can be challenged easily is unsettling. It triggers narrative violations and can shatter the self.
At the end of all that, OpenAI remains the leader of the pack; its products offer the most polished user experience and the most features. However, UI and UX are hardly a strong moat. With DeepSeek, Qwen, Kimi and others, China and the open source AI movement have virtually caught up with OpenAI. There is no use case where choosing a model from OpenAI will give an insurmountable advantage over using an open source AI alternative. Open source will continue to grow even faster in 2025. Models are commodities. The moat is the talent to train models and build products on top of them. The moat is the brand. The limiting factor is the amount of compute available. What’s different now is that AI researchers no longer have to start from scratch to reach OpenAI’s level of model capability. Powerful open-source pre-trained models are available (DeepSeek V3 & R1, but not only), and post-training is reasonably accessible.
The Geopolitics of AI
The AI race is increasingly geopolitical, like I previously wrote in this newsletter. I think the B2B market will be dominated by different players with divisions along spheres of geopolitical influence. In North and South America to some extent, I expect to see the likes of OpenAI and Anthropic continue to dominate. Cohere might dominate in Canada but so far nothing points to an ability to challenge OpenAI or Anthropic in the US.
Similarly, Mistral AI has a good chance of dominating in France and the EU due to the political connections and will of French and EU leaders to craft their own path in the AI race. Recent announcements of corporate partnerships (AXA, SAP, Capgemini, and others) and the construction of an AI cluster in Essonne seem to confirm my hypothesis of a huge B2B play at the EU level. The Paris AI summit currently underway is also a show of strength for the French AI ecosystem. The French pitch is basically as follows: “We have the energy (cheap and clean nuclear energy), we have world-class talent (at least in mathematics, maybe less so in engineering), come invest in our tech ecosystem.” That’s basically the pitch you will hear from President Macron and others all week long.
And that pitch works, to some extent. Macron has already announced a €100 billion investment in AI from various local and international investors. The French people reading this newsletter probably had their hair stand on end when I said France has world-class talent in mathematics and maybe less so in engineering. Some of you might be ready to respond: “But we have Polytechnique (X), ENS, Centrale, and more.” And I can’t deny that. My experience, though is that the engineering culture in France often turns too academic, and a lot of engineering schools train people with the idea that they are destined to become managers instead of deeply technical people. How many top engineers go to X just to end up in finance to make big bucks ? How many create tech startups ? It’s cultural and it has to do with incentives.
My feeling after living in France for the past 5+ years and working in tech is that there is a cultural incentive to move away from deeply technical subjects fast, as a way to grow in one’s career. You will be shocked to see how much a lot of non-technical people can quickly become leaders of technical people and get more pay and influence in the process. That is the recipe to convince your techies that there is no upside in staying a techie for a long time. So there are a lot of engineers (relatively), but most of them can’t build anything and become consultants. So they can do the most beautiful slides ever, engage in corporate political games better than Machiavelli himself, and they can surely tell you what a topological algebra is. If you don’t know what that is, check the definition on Wikipedia. (You don’t have to use “Le Chat”for everything, ok? 😏)
I might be exaggerating a bit, but combine all I said with a cultural aversion to risk and failure, the excessive elitism even in startup hiring and VC funding, and you end up with a formula that fails and will probably fail to be competitive against the US and China’s tech ecosystems where tech talent density is also probably higher just because of demographic scale.
For a country of its size, France is already punching above its weight to be honest. And that’s impressive.
I expect the Paris AI Summit to be great. If there is something about the French, as proven by the latest Olympic Games,it is that they know how to put on a good show.Thish is to be expected from a country with so many beautiful monuments, deep historical prestige, and a quasi-hegemony over the luxury industry.
As for the EU expansion of Mistral, given the frequent silent power struggles between Paris and Berlin, I don’t know if the Germans will accept being second in AI. One can note that while Macron was opening the AI summit in Paris, Sam Altman was in Germany announcing a new OpenAI office. Coincidence ?
Africa, the continent I was born in, isn’t even on the radar as a producer of AI innovations. Much like for the internet and the rise of social media, the lack of preparedness and infrastructure limits Africa to be mostly a consumer of AI innovations. Africans who have regular access to the internet can already use DeepSeek, ChatGPT and other chat interfaces. It is still difficult to see what the overall impact will be. Will it be a great educational tool or mostly a great misinformation and propaganda tool ? Will it be just another way to search on the internet ? For now, Africans (most of them on the free tier for obvious economic reasons) are producing data AI companies can use to train their models. I doubt a lot of them are opting out of that when using the free tier, maybe less so than in the EU and the US.
AI could’ve been, and maybe will be, a great way to store the knowledge of local languages at scale, even in the absence of extensive literature. But what for ? Knowing the human tendency to form small groups based on identity, I often wonder if stubbornly working to preserve languages used by often less than 100K people is worth the tribalism and divisions, especially when these groups fight each other as if they are from different planets. I know firsthand what I am talking about, having grown up in Cameroon, a small country with around 250 languages spoken. Anyway, that’s another debate.
Frankly Africa’s no-show in the AI race is not that concerning to me. Africa has much bigger problems to tackle (basic infrastructure, education, governance). Spending billions on training yet another LLM is definitely not a priority.
I think OpenAI will continue to dominate the B2C market because of their brand (ChatGPT started it all) and continuous innovation on the product side (slick UI & UX, more features, and more products). DeepSeek may be able to make a dent there, but I think availability issues due to their limited access to compute, as well as concerns regarding data access by the CCP, will likely restrict their scale of reach in the West. Things might be different in Africa, South America, and India, because of a more skeptical view of the West’s tendency to claim the moral high ground even as ChatGPT and others probably collect as much data as DeepSeek. But you know, it is only bad when it comes from China…
Which leads me to the crux of the issue, and the inspiration of this post’s title. DeepSeek started a panic in US tech circles about China’s catching up and potentially seizing leadership in the AI space. Are those fears warranted ? Why is China releasing an open source LLM a threat to the US?
Make American AI Great Again
I think, at a fundamental level, and for irrational reasons, this has everything to do with the fact that China is already the first economic power if you look at GDP PPP. In the US there is a sense of decline that exacerbates the competition with China. When the whole identity of a country, for decades, has been: “we are the best, we are the first,” it can be a bit unsettling when that gradually no longer becomes the case. But there is obviously more.
Some think generative AI is a revolutionary technology that will eventually lead to AGI. And AGI is akin to the atomic bomb of intelligence, the reasoning goes. If achieved, it could drive progress across all domains, including medicine and military applications. So, the first country to develop AGI will potentially become the most powerful on the planet.
Knowing how LLMs are trained and work, I think there is a lot of wishful thinking in the line of reasoning I just presented. But the mere existence of the possibilities outlined above with a nonzero probability of occurrence, makes it impossible for countries that can afford to do it not to enter the AI race and treat every country from the competing block (democracies vs autocracies) as adversaries. It’s all about the strategic imperative.
Consequently, the US has mainly leveraged export controls on high-end chips to limit China’s progress. That has not been so successful since DeepSeek was still able to catch up. It looks like export controls will mostly delay but not significantly curtail Chinese AI progress.
I think China’s strength boils down to talent density. China has more STEM graduates than the next four countries combined. The US is focusing on external tactics to win the AI race, when it should probably look even more at internal levers of action. While stopgap measures may be effective in the short term, they are likely to fail in the long term due to differing fundamental conditions.
The US is currently facing internal divisions and chaos since the last election (in perception if not in reality). Every article I read about the US evokes a constitutional crisis. Politics and decision-making at the highest level of government often appear to disregard established facts. The US is spending more time bullying allies than foes with tariffs and threats. You can understand why I think that if the US loses the AI race in the long run, it might have more to do with internal divisions than anything China does. I am not a historian, but I do know that a lot of past empires fell primarily due to internal divisions and weaknesses that made defeat under external pressure evident in hindsight.
And I write this knowing that China doesn’t even have a perfect picture right now or in the foreseeable future. Demographic issues are poised to emerge in the next few decades. The US, thanks to immigration, will probably avoid those issues.
There is a clear possibility that the US stays on top or reclaims the ultimate spot in the future. That likely requires preserving the tenets of Pax Americana, which is probably not what we will see during the next two years.
Dangerous and exciting times ahead.