This week, China shocked the West with its announcement of DeepSeek, an artificial intelligence network capable of competing with OpenAI, Meta and Google. The fact that China was able to develop DeepSeek without a heavy supply of sophisticated microchips from Nvidia sent Nvidia stock spiraling, along with the other major tech companies in the United States: China seems to have cracked the code to bringing down the cost of AI development radically, in the process ending-around sanctions against their access to those microchips. In the words of former Intel Chief Executive Pat Gelsinger, "Engineering is about constraints. The Chinese engineers had limited resources, and they had to find creative solutions."
Now, it remains to be seen just how revolutionary DeepSeek's development was. China has a bad habit of both stealing intellectual property and lying about its own technological development. Suffice it to say, however, that China has demonstrated once again that America exists in a competitive world -- a world of enemies determined to outcompete the United States.
Some, like investor Marc Andreessen, have likened China's announcement to the Soviet announcement of the launch of the satellite Sputnik in 1957, a development that shocked the American people out of their post-war arrogance and led to the creation of the American space program.
It's time for the U.S. to take the initiative again.
And that means it is time for America to unshackle its innovators.
This is something President Donald Trump understands well. He called DeepSeek a "wake-up" call for American industry, explaining "we need to be laser-focused on competing." He added, "If you could do it cheaper, if you could do it (for) less (and) get to the same end result. I think that's a good thing for us."
He is not wrong. Lowering the barrier to entry for AI means wider innovation, which means faster development overall. But such development could be at odds with Trump's self-stated goal of reshoring actual manufacturing to the United States: The same day he noted DeepSeek's game-changing revelation, he announced that the United States would "be placing tariffs on foreign production of computer chips, semiconductors ... to return production of these essential goods to the United States of America." The goal would be the forced relocation of factories from countries like Taiwan back inside America's borders.
Recommended
The problem with this, of course, is that such relocation is both expensive and burdensome, adding time and cash to the list of hurdles American companies must clear to compete with DeepSeek and China. It would be wonderful if more semiconductors were produced in America. It is also years off. Giving up any competitive advantage -- and Taiwan's opposition to China means that it is oriented toward the U.S., thus granting us a competitive advantage -- is a mistake.
One of the great advantages of the United States during the Cold War era was the Soviets' addiction to economic autarky. The United States' economic growth during the post-World War II era was attributable both to its relatively undamaged status during WWII and to its far more robust network of trade and security alliances, ranging from West Germany to Britain to Canada to Japan. If the United States wishes to outcompete China in AI -- and everything else -- it would be counterproductive to threaten the very relationships that grant us inherent advantage.
No doubt Trump knows that. TSMC, the Taiwanese semiconductor manufacturer that leads the world in production of sophisticated microchips, has already vowed tens of billions of dollars in investment in the United States. Trump is utilitarian in his approach; he has no interest in losing the AI race to China over tariffs or anything else, and may well be using the threat of tariffs to pry concessions from companies like TSMC.
Whatever the case, America cannot afford to lose the AI race. China has fired the first shot in the AI battle. Now it's time for America to do what we do best: win the war.
Join the conversation as a VIP Member