Stock markets old just a few minutes ago, and it's not pretty down big, especially the tech having nasdak well shares of Santa Clara's in video fl hard this morning on the popularity of a new Chinese artificial intelligence of bit, little known Chinese company sending shock waves through the stock market and calling into question US dominance in artificial intelligence.
The arrival of deep Seek wiped more than a trillion dollars off the value of America's tech firms, toppling the US from its unquestioned place leading the world's AI race, and upstaging Donald Trump as he announced the five hundred billion dollar Stargate project. The fact that a relatively small disruptor like deep Seek could do such damage calls into question everything Silicon Valley would like us to believe about
artificial intelligence. From Schwartz Media, I'm Ruby Jones. This is seven AM today, Managing editor of the Saturday Paper Emily Barrett on why Deep Seat caused markets to crash and what it means for the tech titans of today. It's Tuesday, February four, So, Emily, it's now been a week since Chinese AI company deep Seak announced itself and there were immediate impacts to that announcement, the value of tech stocks
in the US crumbled. But could we go back to before that happened, and can you tell me a bit about the AI landscape before deep seat came along?
So this was all about America. They were unquestioned in their dominance of AI and you know, the brightest minds in the country or at work on it. Everything for many years now has been set up for the American tech industry to succeed. And it's clear that it's been a huge focus of the incoming administration as well. As soon as he took office, President Trump announced Stargate.
Stargate, So put that name down in your books, because I think you're going to hear a lot about it in the future. A new American company that will invest five hundred billion dollars at least in AI infrastructure in the United States and movement.
US companies have poured billions and billions of dollars into advancing AI and a quarter of a trillion dollars was projected for this year alone. And you only have to look at the front row of guests at Trump's inauguration to kind of get an idea that tech is at the forefront of American innovation, and it's certainly at the forefront of American policy.
As Donald Trump is sworn in today, the nation's richest and most powerful tech tycoons had some of the best seeds in the House.
Sidebind Trump has made no secret of the fact that he really wants to see money getting poured into tech in America as the dominating force over specifically China.
Okay, and central to that investment is the production of computer chips. So what has the US government been doing to make sure that there is an supply.
Well, Specifically, the Biden administration signed into law something known as the Chips Act that stands for creating helpful incentives to produce semiconductors for America.
Well.
President Biden signed the Chips Act in the law today. The two hundred and eighty billion dollar plan includes fifty two billion in subsidies for US computer chip companies, twenty four billion in tax credits for new manufacturing facilities.
This allowed for around two hundred and eighty billion in new funding to support chip manufacturing in the US. They
really want to bring this industry on shore. It's a part of them securing their supply chains and a part of that competition with China, it included incentives for domestic production, tax credits and money for a search and workforce training and sort of complementary to that are policies that have actually been running since the time of the first Trump administration, which were restricting supply of AI chips to China for
many years. And last year actually Sam Oltman, who is the CEO of OpenAI, started trying to raise seven trillion dollars to try and remake the global chip industry. The US economy, just to put that in perspective, is worth about thirty trillion US dollars and Australia's is almost two trillion in US dollars. So that's more than three times the total value of our economy. Wow. Yeah, And it's
not just America who wants chips. The race to manufacture and to buy chips has definitely intensified, and so America has also been reliant on manufacturers in Taiwan, and they've been trying to thwart China by putting export bans on the leading US chip manufacturer and video. You know, this is a hugely important strategic commodity.
Okay, And so then along comes deep Seek. Tell me more about the company itself.
Yeah, deep Seek is a really fascinating company and there's not an awful lot known about it. So it emerged in twenty twenty three. It's led by a forty year old man whose name is Yang Wanfeng. He was a hedge fund executive. He founded a hedge fund called high Flyer Want Hedge Fund worth eight billion dollars. That's understood
to be the finanswer of deep Seek. And the technology that was launched was called r one launched crucially at the same time as sort of an open source research document that people can actually access generally to you know, see exactly how this was created, how deep Sek came about, what it's based on, how its model works. The most important thing for the market reaction was that deep seek is able to do what it does on a fraction
of the budget of what chat GPT can do. So it means that software developers can use deep seek much more efficiently, much more cheaply than they could use chat GPT. So really, I mean, what it's done is it has done the traditional job of a disruptor. Deep Zeek has
called into question the approach of its competitors. So some observers have been saying for a while that actually US tech companies are overvalued, and they obviously now feel a little vindicated by this news and by the market reaction. Among them are people like Ed Citron, who was a tech analyst, who says that Silicon Valley had just become complacent and it was too interconnected to be truly competitive. Open AI, it's fair to say, has been making its
name on promises and imaginative concept. It hasn't been profitable, and so critics like Citron are coming to a point of having to ask, is this technology is the benefit of it clear? Do we know what it's actually good for?
Coming up after the break, what is AI actually good for? So, Emily, AI is clearly very important to Donald Trump. As you said, he announced Sargate as soon as he became president. So how does the emergence of deep seek complicate his plans for America's dominance here?
Yeah, it's really interesting that China has in a way sort of shown that they can get around the trade restrictions and the sorts of curbs that the administrations have been trying to put on China for quite some time. And they got around that this time by simply using fewer of the chips. The US, up until this sort of point, had still seemed fairly convinced that the battle was about money and skills. China has shown that it
has no shortage of the latter. It's also proven that money may not be quite as much of a factor because it can innovate more cheaply. It's also important to keep in mind that Trump is doing a bunch of things that are potentially hurting the industry right even in the US. Trump we know that he's a fan of tariffs. The industry isn't a fan of that. There have been multiple meet he's already videos. CEO has gone to see Trump, and people broadly across the tech industry know that putting
tariffs on supply only pushes up costs domestically. And we know that he's not a fan of anything that Biden did. So he's trying to differentiate his administration by first of all, trying to unpick parts of the Inflation Reduction Act, and a key part of that was the Chips Act.
And Emily, what does all of this say to you about Silicon Valley and the tech Titans? Is it the case that it is actually a far less innovative environment there than the CEOs of these companies would pretend and have these CEOs become very very rich off the back of tech that was perhaps overvalued.
I think that's a really good way of summarizing it. Frankly, there's a view out there that's emerging, possibly gaining some strength now that the tech sector had become very complacent that all the money that's been thrown at tech years, year after year after year, was really not encouraging them to innovate in the way that we're now seeing China able to do, and what was really needed in the
US industry was a genuine threat. So, you know, part of this is not only were the AI executives and sort of think is no longer thinking in a disruptive way? Were they thinking creatively enough about how to bring value for money to the sector, but what is the compelling
use case of AI? People are very captured by the potential of AI, and that was also helped by the fact that Sam Altman wrote an open letter along with a few other AI executives that was literally raising the threat of an untrammeled AI what it could potentially do. We've all got those images in our heads of some sort of terminator, you know, machines against man. Kind of debate here. But when we think of AI at this point,
we think about chat gipt. Now, what you'll hear constantly from executives like Sam Altman is you know, these analogies to Apple in the early days or to Uber in the early days, when you know, yes there was some investment, Yes there was a lot of money being thrown around, it wasn't entire clear these businesses were going going to be that success. When were they going to post profits? When were they going to become the giants that we
know them as today. And his argument would be, you know, open AI is on the way to that, it's yet to turn a profit. But the difference that people like Ed Cetrona pointing out is we knew what Apple was proposing. The iPhone was a pretty clear proposition. We may not have known at the time exactly how integral it was going to become to all of our lives, but it was clear what it could do. AI is a complicated, multi stranded project that a lot of people have trouble conceptualizing,
let alone seeing, in terms of their daily lives. Yes, we know that can help kids cheat on their tests. We know that big data is a very useful way of sort of crunching down lots of information into key findings. But as far as really understanding a clear cut message of how AI is benefiting us in our daily lives, it's something that still maybe has to be sold. Maybe that's what the market is telling us.
Emily, thank you so much for via.
Time, Very welcome. Thanks a lot.
Also in the news today, journalist Antonette Latouf has given evidence in the federal court in her case against the ABC for wrongful dismissal. Lawyers for Latouf revealed private messages between senior ABC executives arguing they demonstrate the decision to dismiss Latouf from her ABC Radio Sydney position was influenced by pro Israel lobbying and went against internal editorial advice.
It was revealed former ABC chair Arta Buttrose pushed for Antonette Leatouf to be taken off air, asking why she could not come down with flu or covid or a stomach upset after receiving a trunch of complaints about her presence as a fill in presenter. Under cross examination, by
the ABC's barrister. Latouf also agreed that she was someone sympathetic to the plight of Palestinian people and critical of the conduct of the State of Israel and Green Senator Sarah Hanson Young says her party will bring on debate on a bill to ban gambling advertisements. Prime Minister Anthony Albernezi has previously stated his government has no plans to ban gambling advertisements, despite being a recommendation of the Peter Murphy Report into gambling. Hum. I'm Ruby Jones. This is
seven am. See you tomorrow.