In the New Cold War, China and the U.S. Battle for AI Dominance

US initiative Stargate and China's DeepSeek response In the New Cold War, China and the U.S. Battle for AI Dominance

2025-01-28 From Henrik Bork | Translated by AI 4 min Reading Time

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The US has announced the prestigious Stargate initiative, under which 500 billion US dollars will be invested in domestic AI infrastructure, thanks to the support of OpenAI, Oracle, Nvidia, and others. Meanwhile, China's open AI model DeepSeek is poised to provide significant competition to OpenAI.

US-Präsident Donald Trump startet mit der Initiative Stargate massive Investitionen in die KI-Infrastruktur in den USA.(Image: DALL-E / AI-generated) — US-Präsident Donald Trump startet mit der Initiative Stargate massive Investitionen in die KI-Infrastruktur in den USA.
(Image: DALL-E / AI-generated)

The AI race between the U.S. and China is increasingly taking on the characteristics of a new Cold War. With "Stargate," the new U.S. President Donald Trump and a group of major investors have announced a $500 billion initiative to ensure the U.S. does not fall behind China in data centers and their energy supply.

Unlike the times of the Soviet Union, when the competition between systems primarily took place in space and nuclear armament, this time both sides have also recognized the importance of AI for future economic and military strength. Even the name of the AI infrastructure initiative in Washington, "Stargate," reminiscent of the Star Wars films, is likely intended to suggest a battle of "good versus evil." However, whether the USA will emerge victorious from this new global arm-wrestling is more than uncertain.

Big initiative with a big name

Shortly after taking his oath of office as the 47th President of the United States, Donald Trump stood in the White House alongside Softbank CEO Masayoshi Son, Oracle co-founder Larry Ellison, and OpenAI CEO Sam Altman. They announced Stargate. Together, the three companies initially plan to invest 100 billion US dollars, and a total of 500 billion USD over the next four years, into the new enterprise.

The focus of Stargate will be the construction of advanced data centers needed for training AI models and the development of the energy solutions required for their operation, which are to be based in the USA. In a just-released white paper, OpenAI writes that investments in AI infrastructure in the USA are intended to ensure that American AI models and applications gain the upper hand over Chinese technology.

It is about a "fundamental strategy" to ensure that the USA is an attractive destination for AI investors from around the world, the document states. There are 175 billion USD in global funds currently waiting to be invested in AI projects. "If the USA does not attract these funds, they will flow into projects run by China—strengthening the global influence of the Communist Party of China," writes OpenAI.

U.S. President Trump, in turn, promised that his administration would do everything in its power to facilitate the rapid construction of the Stargate data centers. “We want it to happen in this country, and we want to make it accessible,” Trump said regarding AI, explicitly naming China as a rival.

Imminent competition from China's open AI model DeepSeek

Shortly before the Stargate announcement in Washington, China once again impressively demonstrated how quickly it is catching up with the USA, particularly in the field of AI. While Christmas was being celebrated in Washington, a startup named "DeepSeek" in the city of Hangzhou released a powerful Large Language Model (LLM) called "DeepSeek-R1," which, according to not only Chinese but also many international experts, does not need to shy away from comparison with OpenAI's "o1."

Against the backdrop of chip boycotts with which Washington has been trying for several years to halt China's progress, particularly in the field of AI, reports about DeepSeek hit like a bombshell. "It is shocking to me," said software engineer and former Google CEO Eric Schmidt, when discussing "DeepSeek V3" and Alibaba's also China-developed "Qwen 2.5 72B."

DeepSeek V3 is a chatbot developed by the young Chinese company based on its new LLM. Not only is it similarly powerful to ChatGPT's o1, but it was also created with much less computing power and money, thanks to innovative training methods, compared to most of its American competitors. According to interviews with employees, DeepSeek reportedly managed to curb the computing hunger of its LLM so significantly that training it required far fewer AI chips from Nvidia than competitors like OpenAI or Meta.

Additionally, DeepSeek has released its new LLM as "Open Weight." This is a remarkable open architecture that, similar to open-source software, allows developers worldwide to work with and further develop the computer code. However, with a model from China, this should be viewed with a healthy dose of skepticism, as it is assumed that parts of DeepSeek are censored.

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Observers interpreted this Chinese breakthrough as evidence that the "chip war" initiated by Washington has unforeseen consequences. Chinese computer scientists and software engineers are being forced to take entirely new paths, achieving remarkable breakthroughs in the process, it was stated.

The U.S. export controls against China, including those on Nvidia AI chips, apparently did not work as intended, wrote MIT Technology Review in its report on DeepSeek's Christmas present to the global AI developer community. "Quite contrary to weakening China's AI capabilities, the sanctions seem to drive startups like DeepSeek to find innovative ways that prioritize efficiency, resource pooling, and collaboration," commented MIT Technology Review. (sb)