The U.S. dominates artificial intelligence, but the rise of DeepSeek and an emerging collaboration between Russia and China in AI could threaten that leadership.
"We are at war with China. We are in an AI arms race," said Palantir Chief Technology Officer Shyam Sankar on the defense company's earnings call with Wall Street analysts in February.
For the U.S., the stakes to win the race are high. From national security to economic competitiveness to revolutionizing warfare, being on the cutting edge of AI is crucial for the country to remain a global leader.
At a global AI summit in February, Vice President JD Vance said: "The U.S. is a leader in AI, and our administration plans to keep it that way."
Is DeepSeek AI's Sputnik Moment?
Tiger Brokers' James Ooi described the AI race as a historic milestone, drawing parallels to a pivotal moment in history. "The AI race is not just about efficiency; it's also about dominance. Many people refer to DeepSeek's impact as an AI Sputnik moment, and I agree," said the market strategist in an interview with Investor's Business Daily.
The AI race has dominated headlines in recent months, especially after Chinese startup DeepSeek caused a ripple in the U.S. markets. In January, DeepSeek's powerful new artificial intelligence system triggered a near $600 billion drop in Nvidia's stock value — the largest single-day drop for a U.S. stock.
This caught the attention of Russia's largest bank, Sberbank. The Moscow-based bank is partnering with Chinese researchers to develop AI technologies, marking one of the most high-profile collaborations in AI between the two nations.
Western sanctions imposed by the U.S. have slowed Russia's AI progress since 2022. But this new alliance may provide a critical boost. According to Reuters, Sberbank First Deputy CEO Alexander Vedyakhin said the bank was drawn to DeepSeek's low-cost solutions instead of massive investments in computing infrastructure megaprojects.
Russia And China Team Up To Research AI
Robert Kirk, CEO of U.S.-based InterGen Data, said China has more advanced AI capabilities but that Russia brings an expertise that is indispensable. Kirk, who has over a decade of experience in AI, spoke highly of Russian talent.
"Over the past 30 years of my life, when I would go out to development firms, one of the first people that I would start to look for would be Russian programmers, because I knew how they programed," he told IBD. "I knew how good they were, how thorough they were, and more importantly, how much they would push the boundaries of what is good enough."
Adam Segal, director of the Digital and Cyberspace Policy program at the Council on Foreign Relations, believes the partnership benefits Russia more than China.
"Chinese firms have more resources and data," Segal told IBD. "What China really needs is access to chips, and Russia doesn't help on that front," said Segal. But Segal adds that Russia helps expand China's AI presence into emerging global markets.
"The Chinese, like the U.S., want to spread its AI systems in as many other economies as possible, and Russia is an important partner," Segal said. "And so being able to demonstrate that providing useful AI to Russia helps China also in the global South and other emerging economies, saying, you know, here's a partnership that worked."
Parallels To The Chip War
The AI race runs parallel to the ongoing chip war between the U.S. and China. "The controls on chips were very much driven by the desire to slow China's innovation in AI," Segal said.
With the U.S. and China vying for control of the next generation of technologies, Kirk says the same type of battle for chips will unfold with AI.
China's AI advancements have already disrupted global markets. And despite DeepSeek's effect on Nvidia, CEO Jensen Huang maintained confidence in the company's long-term growth, citing strong demand for Blackwell chips. While he praised the DeepSeek R1 platform as an "excellent innovation" on the company's Feb. 26 earnings call, he insisted it would not hamper the chipmaker's sales.
Segal highlights the volatility in the AI race, pointing to events like DeepSeek's impact on the U.S.-China competition. "It is an important signpost and does raise questions long term about whether we can ever say who's winning or where we stand in that race, because there will always be swings back and forth," he said.
U.S. Bets On AI
Investors remain on edge and question if the artificial intelligence boom is truly worth the hype. But the U.S. is going all in. President Donald Trump recently highlighted the urgency of U.S. AI investments in January as he traveled in Florida.
"The release of DeepSeek AI from a Chinese company should be a wake-up call," Trump said. His administration has since launched the $500 billion Stargate Project to invest in AI infrastructure while pushing for looser regulations to spur innovation.
Vice President Vance defended the approach in February saying, "Excessive regulation could kill a transformative industry just as it's taking off."
However, strategist Ooi questioned the sustainability of hefty investments. "The DeepSeek low-cost AI model shows us that massive spending on infrastructure may not be necessary. So this raises questions about the long-term sustainability of initiatives like the $500 billion Stargate project."
DeepSeek's Next Hurdle
While some investors remain wary of China's AI advancements, Ooi suggested the risk may be overstated. "U.S. investors shouldn't be overly concerned about China's AI development," he said, citing potential hurdles for Chinese companies in monetizing AI models due to security and privacy concerns.
U.S. government agencies like the U.S. Navy and NASA are looking to address these concerns by banning DeepSeek on federal devices. And Texas, Virginia and New York are banning the app on state-owned equipment.
DeepSeek's long-term growth faces another headwind: access to AI chips. China lags in computing power due to U.S. chip export restrictions, giving the U.S. an edge in the AI software market.
But Beijing is fueling advancements in other artificial intelligence technologies. The country holds the largest robotics market in the world, accounting for over 50% of global robot installations in 2024. Ooi says while China may have a breakthrough in algorithms, its data and computing power are limited compared with U.S. technology companies.
Ooi added, "If history is any indication, I reckon massive spending on AI, including AI infrastructure, will continue — not just for financial returns, but to stay ahead in the global AI race."
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