The release of DeepSeek’s R1 – China’s powerful new open-source AI model – has sent shockwaves through the global tech industry. Offered for free and royalty-free, it has disrupted financial markets, challenged the United States’ dominance in artificial intelligence, and prompted fears that Silicon Valley’s tightly guarded business model may no longer hold.

DeepSeek’s open-source launch is widely seen as a key trigger behind a trillion-dollar tech sell-off in the US, signalling deep investor anxiety over the commodification of AI and China’s growing competitiveness. Dubbed “China’s answer” to OpenAI’s GPT‑4, R1 has unsettled investors and shifted global AI geopolitics.

Reports suggest R1’s compute costs were less than $6m, using Nvidia’s H800 chips. While full development expenses remain undisclosed, this points to a markedly more cost-effective model than proprietary counterparts. It suggests R1 may have been built for a fraction of OpenAI’s GPT‑4 expenses – rumoured at hundreds of millions. This cost efficiency, paired with open access, makes DeepSeek’s model uniquely disruptive.

Chinese firms like Alibaba, releasing the Qwen3 Embedding series freely, and France’s Mistral AI (with Europe’s first reasoning LLM) are following suit. The US risks losing ground unless it embraces open-source strategies. After all, early internet giants such as Google and Facebook leveraged free, user-centric services (like Gmail and Maps) to drive adoption before monetising.

In a field where secrecy is standard and models are often locked tight, giving away valuable tools seems counterintuitive. Yet OpenAI, once a trailblazer with GPT‑4, now appears cautious. CEO Sam Altman has defended the $500bn Stargate Project, designed to lock in AI leadership. However, practical expansion beyond ChatGPT has been slow, with only a nascent shopping feature launched. US competitors (Google Gemini, Meta Llama, Anthropic Claude) have yet to drive faster or cheaper innovation.

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Initial US dominance grew on incremental gains, supported by export curbs on Nvidia chips and other tech that slowed Chinese progress. Yet Nvidia’s Jensen Huang warned these restrictions could backfire, catalysing China’s chip industry and ultimately weakening US control.

Open-sourcing has become China’s strategic workaround: Legal, scalable, and globally collaborative. It mirrors how Android thrives via external developers. AI improves through iteration, and Chinese firms now leverage open-source ecosystems to refine and scale models without shouldering all costs, just like the Google Play model.

Meta’s chief AI scientist, Yann LeCun, described DeepSeek’s rise as an open-source triumph, not merely China overtaking the US. Still, geopolitical stakes are clear: Free access debases proprietary models’ monetisation path. If open-source achieves parity, commercial models lose leverage.

China’s industrial strength lies in speed and scale. By saturating the market with low-cost, capable models, it pressures competitors until only the dominant, widely adopted model remains valuable – monetised via advertising, data, or premium add-ons, a route well-trodden by Google and Facebook.

US investors are acutely aware. The reported $1 trillion dip following DeepSeek’s release reflects systemic concern. For China, open-sourcing is another facet of a national industrial strategy: Subsidise, dominate, and claim benevolent intent via “AI for good”.

Open-sourcing isn’t risk-free: If US tech is freely available, global rivals – including Chinese firms – can repurpose and surpass it. The reverse could also be true.

China, too, faces limitations. Its strict internet censorship regime raises questions about how open-source models trained in that environment can adapt to global content demands. This has already surfaced on RedNote (Xiaohongshu), a Chinese social media app that recently attracted many American users fleeing a potential TikTok ban. While the cross-cultural exchange has been largely positive, tensions have emerged – particularly around content moderation and censorship of politically sensitive topics like Taiwan and Xinjiang.

These constraints could disadvantage Chinese AI models when competing for trust and relevance in international markets.

Nonetheless, open-source AI has allowed China to compete without access to cutting-edge US chips, recalibrating the global AI landscape. Even in the US, leaders – from Elon Musk’s Grok-1 to OpenAI’s evolving stance – have begun to recognise that long-term AI dominance depends not just on proprietary control, but on adoption, accessibility, and innovation at scale.

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In the end, the path to US AI supremacy may not lie in guarding models behind closed doors, but in embracing the very principles of openness and decentralisation that China is now leveraging to reshape the global playing field.

The great irony is that the next leap in US tech dominance may come as an (un)intended consequence of China’s so-called “socialist AI” approach.

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.