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Midjourney

How DeepSeek changed China’s AI ambitions

Just a few short months ago, Silicon Valley seemed to have the artificial intelligence industry in a chokehold. Startups OpenAI and Anthropic blazed the trail on large language models while Google, Meta, Microsoft, and other tech incumbents invested billions to keep up. Meanwhile, the United States’ distinct chip advantage from homegrown giant Nvidia and overseas allies Taiwan Semiconductor made America’s lead over China seem insurmountable.
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The NVIDIA logo seen at the American GPU manufacturer NVIDIA Taipei office.

Walid Berrazeg / Hans Lucas via Reuters Connect

Nvidia forges deals in American Southwest and Southeastern Asia

Nvidia, the world’s leading AI chip designer, has plans to expand its footprint both in the United States and around the globe.
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US takes a close look at TSMC and Huawei

The US Commerce Department is looking into whether Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker, is — knowingly or unknowingly — producing computer chips for the Chinese technology giant Huawei.

TSMC is one of the most strategically important companies to the United States because of its overwhelming market share in the chip fabrication process. Chip designers such as NVIDIA, AMD, and Apple send their chips to be made at TSMC facilities. But it’s also located, as its name suggests, in Taiwan — and that makes its relationship with China, which doesn’t acknowledge Taiwan’s independence, geopolitically significant.

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A computer chip with the letters AI on top of it.

Photo by Igor Omilaev on Unsplash

How China smuggles sought-after chips

The US has placed strict limits on the sale of powerful chips to China. But in the underground electronics market in Shenzhen, the southeastern port city, vendors reportedly claim to be moving hundreds or even thousands of banned chips. These include Nvidia’s A100 and H100 series chips, their most advanced models.

One vendor said he arranged a $103 million shipment to a nearby warehouse. “The Shenzhen market cannot be restricted,” he told the Times. That these middlemen are getting their hands on powerful chips is a serious threat to US economic and national security priorities, as the Biden administration is dead set on limiting Chinese access to any technologies that can fuel the government’s AI ambitions. Commerce Secretary Gina Raimondo said recently that she’s under “no illusions” that her department is executing their goals perfectly and told the Times she’s limited by budget constraints.

A Chinese military with artificial intelligence at its fingertips is a nightmare scenario for the US, and while its export controls have limited what China can make, it might never be able to fully plug leaks in the mechanism.

A photo illustration of a smartphone displaying the NVIDIA Corporation stock price on the NASDAQ market, with an NVIDIA chip visible in the background.

Jonathan Raa/NurPhoto via Reuters

A chip bottleneck

Margrethe Vestager, the European Union’s competition chief, has warned of a “huge bottleneck” involving Nvidia. The US semiconductor company plays a pivotal role in designing chips necessary for training and running artificial intelligence models and applications — good for 80% of the market. In recent months, Nvidia has become a $3.1 trillion company — now the third-most-valuable firm in the world behind only Microsoft and Apple.

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US Secretary of Commerce Gina Raimondo announces a major grant at the Samsung semiconductor plant in Taylor, Texas, on Monday, April 15, 2024.

Jay Janner / American-Statesman / USA TODAY NETWORK via Reuters

Samsung hands Biden another chip win

The Biden administration is busy courting global semiconductor manufacturers to build stateside, recently handing billions to Taiwan Semiconductor Manufacturing Company to expand its chip fabrication plant in Phoenix, Arizona.

On Monday, Commerce Secretary Gina Raimondo announced that the Biden administration is giving out another award as part of its CHIPS Act budget — this time to TSMC competitor Samsung, the South Korean electronics giant. Samsung will receive $6.4 billion to put toward its new manufacturing hub in Taylor, Texas, and expand its existing plant in Austin. In return, Samsung will pour $45 billion into its US projects and commit to producing cutting-edge two-nanometer chips.

Biden has made so-called silicon nationalism a tenet of his economic and national security-focused public policy, desperate to control the slow but crucial supply of chips used for everyday technologies as well as new artificial intelligence applications.

The logo of OpenAI is seen displayed on a mobile phone screen with the Nvidia logo in the background.

Idrees Abbas/SOPA Images/Sipa/via Reuters

The rise of AI giants (and their challengers)

Two winners have emerged from the AI boom’s first year, but others are in hot pursuit.

Within a few days of ChatGPT’s launch on Nov. 30, 2022, the chatbot attracted millions of users, proving that the world was ready for consumer-grade AI. This made OpenAI, the parent company, a clear victor on the software front. On the hardware front, NVIDIA grabbed the spotlight. The company’s graphics-processing chips have become the industry standard for fueling powerful AI models, making NVIDIA a trillion-dollar company this year.

Wannabe contenders, however, are trying to catch up.

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Federal Chancellor Olaf Scholz on stage at the Digital Summit 2023 in November.

Martin Schutt/Reuters

Wie sagt man: Not cheap as chips?

Deutschland had a dream of boosting its semiconductor production and promised rich subsidies to chipmakers. But now, amid budget woes, that support is in doubt.
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