DeepSeek’s Open-Weight Leap Prompts a China-Driven Reboot of the AI Arms Race

DeepSeek’s open-weight R1 stunned markets by matching elite LLMs at a fraction of the cost, triggering a $750 billion drop in the S&P 500 and a $590 billion hit to Nvidia on one day in 2025. Yet the story didn’t end there: U.S. hyperscalers plan over $600 billion in AI infrastructure for 2026, while Chinese firms push efficiency with open-weight models like Alibaba’s Qwen, seeding global adoption and capital inflows back to China. Critics say the real change is on the Chinese side, where cheaper, efficient architectures and state-driven AI policy are reshaping the race, even as the U.S. maintains a hardware edge and export controls. The long-run winner may hinge on whether scale or smarter design proves most valuable.