WSJ What’s News: How DeepSeek Caught Up in the AI Race
Episode Release Date: January 28, 2025
Host: Luke Vargas, The Wall Street Journal

1. Market Turmoil Amid DeepSeek's AI Breakthrough

The episode opens with Luke Vargas highlighting the significant market volatility triggered by Chinese AI startup DeepSeek's rapid advancements in artificial intelligence. This development has stirred debates on whether DeepSeek poses a threat or offers opportunities to the world's leading tech giants.

• Market Reaction: DeepSeek's progress led to a dramatic fall in Nvidia's stock by 17%, alongside losses in other AI-related stocks and nuclear power companies. The NASDAQ index also plummeted over 3%. However, off-hours trading showed a slight recovery for Nvidia, and US Futures remained flat, suggesting a potential market stabilization.

• President Trump's Commentary: Reflecting on the situation, President Trump remarked on the positive aspects of DeepSeek’s approach:

  “[02:08] Today and over the last couple of days I've been reading about China and some of the companies in China, one in particular coming up with a faster method of AI and much less expensive method. And that's good because you don't have to spend as much money. I view that as a positive, as an asset.”

2. DeepSeek’s Innovative Approach to AI Development

Stu Wu, a reporter for The Wall Street Journal stationed in Singapore, delves into how DeepSeek achieved its breakthrough.

• Efficiency Through Innovation: DeepSeek employed a novel method contrasting traditional AI models like ChatGPT. While ChatGPT functions as a "librarian" that relies on vast pre-read data, DeepSeek operates more like a "detective," sourcing answers in real-time when prompted. This approach, though seemingly energy-intensive per query, proves more energy-efficient and cost-effective in the long run.

  “[00:42] Stu Wu: If you go back to the earlier generations of ChatGPT, think of it like a librarian and it's read all the books. So when you ask it a question it goes, oh, I read that in a book. Here's the answer. Deep Seq found a shortcut. It's more like a detective. It's read a little bit, but when you ask it a question, it'll say, okay, here, let me go find the answer right now.”

• Cost Advantages: DeepSeek developed advanced AI capabilities using earlier generation Nvidia chips, significantly reducing expenses compared to other AI firms.

3. Challenges with US Export Controls and Nvidia's Influence

The discussion shifts to the role of US export controls intended to curb China's AI advancements. Stu Wu explains the loopholes that allowed Nvidia to inadvertently aid DeepSeek.

• Export Control Loopholes: Despite restrictions, Nvidia engineered chips that met the letter of export regulations but still delivered enhanced performance. This unintended loophole enabled DeepSeek to leverage Nvidia's technology, facilitating their AI progress.

  “[04:04] Stu Wu: Yeah, the other one is I think there's this assumption that the US Slapped these export controls that make it hard for US Chip companies sell leading chips to China. That is true, but there's actually been a pretty bumpy road for actually implementing them.”

• Future Implications: The Biden administration has since tightened these controls, reducing the efficacy of previous measures and limiting the power of new chips sold to China.

4. President Trump’s Optimistic Take on AI Competition

Luke Vargas explores President Trump’s perspective, who views the intensified AI competition as a catalyst for efficiency and innovation among American tech leaders.

• Economic Efficiency: Trump suggests that competition from DeepSeek forces US companies to innovate more efficiently.

  “[05:24] Patient Trump: Instead of spending billions and billions, you'll spend less and you'll come up with hopefully the same solution.”

• Industry Response: Silicon Valley acknowledges DeepSeek's innovative methods, recognizing that American firms can adopt similar strategies to enhance their AI training processes.

  “[05:43] Stu Wu: Yeah, a lot of people in Silicon Valley are saying the same thing.”

5. Senate Confirmation of Scott Besant as Treasury Secretary

The episode transitions to significant political developments, focusing on Scott Besant's confirmation as Treasury Secretary and his anticipated impact on President Trump's economic agenda.

• Scott Besant’s Stance: Besant is a proponent of extending tax cuts, which face expiration. He emphasizes the necessity of rein in the deficit through spending cuts rather than tax hikes, aiming to balance economic growth with fiscal responsibility.

  “[08:12] Chelsea Delaney: Besant said in his confirmation hearing that he does want to see those tax cuts extended. And if they aren't extended, that would be pretty detrimental to a lot of Americans.”

• Tariff Policies: Positioned as a moderating force, Besant supports tariffs but advocates for a balanced approach, which has garnered him favor among investors seeking stability.

6. Trump Administration’s Freeze on Foreign Aid

A controversial move by the Trump administration involves freezing nearly all foreign aid, causing significant disruptions to various programs.

• Immediate Impact: The executive order mandates a three-month halt on foreign assistance, affecting humanitarian programs, counterterrorism efforts, and weapons financing. This pause has left vital programs in jeopardy, with aid workers and officials expressing deep concern over potential global repercussions.

• Government Response: Agencies like the State Department have been inundated with waiver requests, but specific details about exceptions or affected programs remain unclear.

  “[07:09] Stu Wu: So when I talk to national security folks in Washington, they're not that concerned right now because they said, hey, look, this is too early to tell.”

7. Surge in ICE Arrests and Mass Deportation Efforts

The administration's aggressive stance on immigration has led to a notable increase in arrests conducted by Immigration and Customs Enforcement (ICE).

• Rising Arrest Numbers: Recent data shows ICE making nearly 1,000 arrests on Saturday and 1,200 on Sunday, a significant uptick from the average of 310 daily arrests during the final year of the Biden administration.

• Mass Deportation Goals: This surge aligns with Trump's campaign pledge to execute the largest mass deportation in US history, targeting individuals with criminal backgrounds, including minor offenses.

  “[09:06] Luke Vargas: Trump is looking to make early progress on his campaign pledge to carry out the largest mass deportation in US History with his team targeting immigrants in the country illegally with criminal backgrounds, including minor offenses.”

Conclusion

The episode of WSJ What’s News provides an in-depth analysis of DeepSeek's pivotal role in the AI race, its market implications, and the broader economic and political landscape shaped by recent US policies. From innovative technological advancements and market volatility to significant political appointments and controversial administrative actions, the episode paints a comprehensive picture of the current events influencing global and domestic arenas.

For those looking to stay informed on the latest business and political developments, this episode of WSJ What’s News offers valuable insights and expert commentary.