How China’s DeepSeek example can help India chart its path to Viksit Bharat – Firstpost

Rarely does a single product, especially one from an obscure two-year-old startup far removed from the Western world (often considered the Mecca of innovation), disrupt an entire industry.

But that precisely happened on January 27 when the Tsunami of DeepSeek, a super-efficient, ultra-low-cost open-source Artificial Intelligence (AI) software from China, crushed the high valuations of American tech giants. This created a trillion-dollar wipeout in their valuations, with the mega meltdown in the share prices of the world’s most valued company, chipmaker, Nvidia, whose stock prices plummeted by more than $600 billion in a single trading session.

Shaking the World

To describe this phenomenon, tech community legend and venture capitalist Marc Andreessen, whose Netscape Navigator enabled the internet revolution, reached back decades to identify the most appropriate historical parallel: the day in 1957 when the Soviet Union beat the US into space with the launch of the first satellite into orbit. Andreessen has called DeepSeek’s release of R1 “AI’s Sputnik Moment”.

Make no mistake—China’s artificial intelligence breakthrough is shaking the foundation of Western countries’ dominance in this technological arms race. It not only suggests that the Communist Party-controlled country has caught up to the United States, but it may also be on the verge of surpassing it. R1’s more cost-efficient AI training and inference challenge the assumptions underpinning the meteoric rise in the valuations of American tech companies.

Rockets High

Before DeepSeek disrupted the AI landscape, the prevailing American paradigm held that companies like Microsoft’s partner OpenAI, Alphabet’s Gemini, and Amazon-backed Anthropic’s Claude were the few with the financial backing and technological firepower to excel in the AI domain. The assumption was that these American companies were in a prime position to monetise their investments by charging customers for proprietary, closed-source AI models.

But this paradigm has been shattered, at least for now, by DeepSeek, which has rocketed up the AI pecking order, making even ChatGPT look pedestrian.

Disruptive Technology Catching Wave

Understandably, the anxiety in the American tech world and the stock market meltdown stem from the sudden emergence of powerful—and cheap—Chinese AI software set to upend the economics of the AI landscape.

But was this disruption unexpected? My short answer: no, for two key reasons:

1. Disruptive Technology Catching Wave

As early as January 1995, Harvard Business Review published an article titled “Disruptive Technologies: Catching the Wave”, in which Clayton M Christensen explained how nimble, low-cost companies can disrupt markets with innovative products, often produced at ultra-low costs. He later expanded this idea in his book The Innovator’s Dilemma (1997).

A recent article titled “Disruptive Innovation: Why DeepSeek Shouldn’t Have Been a Surprise,” published in Harvard Business Review on January 30, 2025, aptly notes that DeepSeek’s success could likely have been predicted by management theory on disruptive innovation. After all, disruptive innovation focuses on low-cost alternatives that perform adequately for many users. DeepSeek seems to have created the shockwave that has challenged assumptions in the American AI industry, contributing to the tumble of tech and energy stocks.

2. Writing on the Wall

The second reason lies in the emerging trends highlighted by the Critical Technology Tracker of the Australian Strategic Policy Institute (ASPI), a data-driven project that tracks 64 critical technologies across fields like defence, space, energy, AI, biotechnology, robotics, cyber, computing, and more.

The most significant finding of the latest tracker is that China and the United States have effectively switched places as the overwhelming leader in global technology research in just two decades. From 2003 to 2007, China led in just three of 64 technologies, but from 2019 to 2023, it led in 57 out of 64. This marks a dramatic shift from the US, which led in 60 of 64 technologies from 2003 to 2007, but now leads in only seven. Given this trend, it’s unsurprising that DeepSeek, from China, fired the latest salvo disrupting the AI landscape overnight.

Questions Raised by DeepSeek

Indubitably, DeepSeek’s emergence as a disruptive technology raises several existential questions. Some of the most important ones include:

Are the astronomically high valuations of American AI companies, including Google, Meta, OpenAI, and Anthropic, justified?

Is it worth spending hundreds of billions on vast data centers powered by expensive chips from companies like Nvidia? This raises serious questions about mega-investments like the $500 billion Stargate Project announced by President Trump to develop AI infrastructure, as well as Microsoft’s $80 billion and Meta’s $65 billion investments.

DeepSeek also challenges whether America needs the massive uptick in electricity generation to power AI, which has driven a surge in utility stocks.

Jevons Paradox Strikes Again

Amid the turmoil in the AI world, Microsoft CEO Satya Nadella put a positive spin on the situation, citing a 160-year-old economics concept—Jevons Paradox—to suggest that the arrival of DeepSeek was good news.

On January 26, Nadella posted on social media: “Jevons paradox strikes again! As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can’t get enough of.”

Jevons Paradox, as postulated by British economist William Stanley Jevons in his 1865 book The Coal Question, states that as efficiency increases, demand also increases. So, while AI becomes more efficient and accessible, its increased use could make it more widespread and affordable.

Only time will tell if DeepSeek is a prime example of Jevons Paradox or a true “Sputnik Moment” for AI.

Blue Whale Logo

Like millions of people globally (and millions in India), I couldn’t resist downloading DeepSeek and was immediately hooked by its cheery blue whale logo and the tagline, “DeepSeek—Into the Unknown” and “Your Free All-in-One AI Tool.”

To my penetrating questions, the responses I received from DeepSeek were equal to—or better than—those from OpenAI’s GPT-4, the multimodal large language model.

Low Cost

What’s even more impressive than DeepSeek’s performance is its ridiculously low cost of creation. According to DeepSeek, it upended the market with its latest release, which cost only $6 million—a fraction of the “over $100 million” it took to create GPT-4, according to OpenAI’s Sam Altman.

Wake-Up Call

DeepSeek’s latest release, R1, gives a run for the money to OpenAI’s ChatGPT in terms of capabilities, while costing far less to create. It raises the tough question of whether American firms will continue to dominate the AI market, a belief that has already been upended by DeepSeek.

Unsurprisingly, US President Donald Trump described this “Sputnik Moment” as a “wake-up call” for American companies.

The DeepSeek Disruption

In the world of AI, no one knows what “tomorrow brings”. But with DeepSeek’s disruption, we now know what happened yesterday:

2. The arrival of DeepSeek’s dirt-cheap developmental model disrupts the core belief that cutting-edge AI requires immense computing resources, high-end microchips, and enormous energy.

3. It challenges the notion of US hegemony in AI and the belief that China’s AI sector is stunted due to the ban on exporting advanced chips to China.

4. It convincingly proves that resource constraints can drive innovation—low-cost Chinese AI entrepreneurs have, at least for now, stolen the march over their Western rivals.

Lesson for India

If President Donald Trump sees DeepSeek’s emergence as a “wake-up call” for US companies, what does this mean for India, which is charting its path to becoming a Viksit Bharat by 2047?

DeepSeek is not the product of a tech giant. It’s from a two-year-old Hangzhou-based startup whose controlling shareholder is hedge fund maverick Liang Wenfeng. DeepSeek didn’t even exist when ChatGPT debuted in 2022.

If a small Chinese startup can rewrite the rules of the AI game, why can’t India, with its vast pool of knowledge workers and burgeoning startup ecosystem, do the same?

My answer is clear: “India can and must.”

According to the latest Critical Technology Tracker from ASPI, India is emerging as a key center of global research and innovation, ranking among the top five countries for 45 of 64 technologies. India is now second in biological manufacturing and distributed ledgers, further cementing its position as a science and technology power.

DeepSeek’s success proves that innovation doesn’t always require deep pockets. India must focus on leveraging its strengths, strategically deploying its resources, and fostering innovation through a “virtuous umbrella” that unites the government, corporate sector, academia, and NGOs.

To Sum Up

India’s AI Mission, which seeks to catch up to the US, China, and the rest of the world in AI, is a good start with its Rs 2,000 crore allocation. IT Minister Ashwini Vaishnaw is optimistic that India will have a foundational AI model with Indic language datasets within 6 to 10 months. India should aim to lead the way, moving ahead of the rest of the world.

The author is a multi-disciplinary thought leader with Action Bias and an India based impact consultant. He is a keen watcher of changing national and international scenarios. He works as President Advisory Services of Consulting Company BARSYL. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.