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OpenAI launch of Stargate AI project preempted by DeepSeek

American company OpenAI has established Stargate, a new company which plans to invest some US$500 billion ($803 billion) over the next four years building new Artificial Intelligence (AI) infrastructure in the USA. The company, which two years ago released its generative AI product ChatGPT, said it would begin spending US$100 billion immediately to help secure US leadership in AI, create hundreds of thousands of jobs and generate massive economic benefits for the entire world.

However, even before OpenAI made this announcement, Chinese company DeepSeek had announced its own generative AI model, R1, which it says can match or outperform similar American AI systems at a greatly reduced price.

The announcement was seemingly deliberately made on the day of President Trump’s inauguration and resulted in a sharp drop in share prices. Taiwanese technology company NVIDIA, which manufactures the advanced chips used by firms like OpenAI, lost 17% of its market capitalisation, its share price falling from US$3.49 trillion to US$2.88 trillion in a single day. The company’s advanced chips are one of the secrets to AI success for OpenAI and others and in 2022 then-President Biden imposed severe export controls on them. It is reported that DeepSeek has amassed an illegal stockpile of NVIDIA’s chips, however.

Many of the Chinese company’s claims about R1’s relative performance and cost remain to be verified. There are suspicions DeepSeek may have used large amounts of data belonging to OpenAI. Also, it censors itself when asked to analyse or comment on aspects of life in China and there are fears that it could gather data about users which could be exploited by the Chinese government.

The initial equity partners in Stargate are SoftBank, OpenAI, Oracle and MGX. The key initial technology partners are Arm, Microsoft, NVIDIA, Oracle and OpenAI. These firms have not yet commented directly on DeepSeek. “The buildout is currently under way, starting in Texas, and we are evaluating potential sites across the country for more campuses as we finalize definitive agreements,” the company says.

The Stargate computing system builds on a deep collaboration between OpenAI and NVIDIA that goes back to 2016, as well as a partnership between OpenAI and Oracle. The computing system will be built by a collaboration between Oracle, NVIDIA and OpenAI and also builds on OpenAI’s existing relationship with Microsoft, which manufactures the Azure AI platform: “OpenAI will continue to increase its consumption of Azure as [it] continues its work with Microsoft, with this additional compute to train leading models and deliver great products and services,” says OpenAI.

It’s not certain at this stage what effect DeepSeek will have on the defence and security markets. The rapid take-up of R1 by western consumers suggests it will be a success in commercial markets, but at the time of writing the US official reaction remained muted.

Newly installed President Trump has described DeepSeek’s release as a “Wake-up call for our industries that we need to be laser-focused on competing to win.”

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