China's DeepSeek is turning into DeepShit for America

Editor's note: This isn't your standard run of the mill commercial global industrial competitiveness, this is now a full scale AI arms race and China is about to eat America's AI lunch. Both the US and China both clearly understand the dynamic of the "winner takes all." This US understands this all too well by leveraging microprocessors China has access to used in AI infrastructure. China understands clearly just how vulnerable the US AI industry is with the staggering debt obligations that are threatening to take down the entire wave of AI investors even without China. Without the microprocessors, China would not be able to go head-to-head with the US AI industry. Instead, China is focused on what is referred to as "computational efficiency." To achieve "computational efficiency", China began leveraging AI models against the US potentially illegally working to undercut the one thing the US is absolutely entirely dependent on: revenue growth. The Chinese have relied on "distillation." It works by building a simple AI model and training it on the outputs from massive well trained "frontier" models like Anthropic, OpenAI and ChatGPT. The Chinese went on to create tens of thousands of fake accounts then sending millions of quarries to the frontier models. The answers are captured then used to distill patterns to teach the smaller cheaper models to behave the same way as the large expense frontier models. America's largest technology companies are borrowing hundreds of billions of dollars to finance AI data centers, power infrastructure, and semiconductor deployments. In the US, investors are increasingly questioning whether future AI revenues will justify these unprecedented debt obligations. 

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Nvidia shares slip as report says China's DeepSeek is designing its own AI chip

Nvidia shares fell after a report said Chinese AI developer DeepSeek is designing its own artificial-intelligence chip, raising the prospect of a new rival in a market Nvidia dominates. The report fanned concern that large customers may reduce their reliance on Nvidia processors. The stock remains one of the year's strongest performers.

By Vesper Global News | July 8, 2026

Nvidia shares slipped after a report said Chinese artificial-intelligence developer DeepSeek is working on its own AI chip, raising the prospect of fresh competition in a market the US company has long dominated. The report suggested DeepSeek wants to reduce its dependence on foreign processors.

Investors have grown sensitive to any sign that Nvidia's largest customers could design alternatives in-house or turn to rivals. Several big technology firms are already developing custom silicon, and a credible Chinese challenger would add to that pressure. Analysts cautioned that designing a competitive chip and manufacturing it at scale remains difficult and time-consuming.

Despite the dip, Nvidia remains one of the year's best-performing large-cap stocks, buoyed by heavy spending on AI infrastructure. Traders will watch for confirmation of DeepSeek's plans and any details on manufacturing partners, which would determine how quickly a rival product could reach the market.
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The global economy has been turned into a dangerous global battlefield:

How the Global Economy Became the World's Most Dangerous Battlefield

Editor's note: China has adopted a markedly different strategy. Rather than attempting to match the US dollar for dollar in capital spending, Chinese AI developers have emphasized computational efficiency. Their objective is to build competitive AI systems using fewer graphics processors, lower training costs, and more efficient software engineering. If successful, this approach could significantly reduce the economic advantage enjoyed by American frontier AI companies. Another critical component of China's strategy has been the use of AI model distillation.

Distillation is a legitimate machine learning technique when used on a developer's own models. However, OpenAI and Anthropic have alleged that several Chinese AI laboratories created thousands of fraudulent accounts and generated millions of interactions with frontier models such as ChatGPT and Claude in an effort to reproduce many of their capabilities. According to Anthropic, more than 24,000 fraudulent accounts generated over 16 million exchanges with Claude to train competing models. Those allegations remain disputed, but they underscore growing concerns that frontier AI capabilities can be replicated at a fraction of the original development cost.

If frontier AI models can be economically copied through large-scale distillation and computational efficiency by China, the greatest threat to American AI leadership may not be China's computing power alone. It may be the inability of US AI companies to generate sufficient long-term revenues to justify the trillions of dollars being committed to data centers, electrical infrastructure, and AI hardware. In that scenario, China would not need to outspend the US. It would only need to deliver comparable AI capabilities at substantially lower cost, undermining the return on America's historic AI investment boom.

The Case for Imposing Costs on China’s AI Distillation Campaigns

So, where does the US go from here considering China and US-based AI platforms that are bullshitting you?