American AI Strikes Back
Adam Sharp

American AI firms have rung the alarm bell and all personnel have reported to battle stations (their computers).

Yesterday, we got a response from OpenAI (ChatGPT owner) CEO Sam Altman. Here’s what he posted on X about DeepSeek:

deepseek’s r1 is an impressive model, particularly around what they’re able to deliver for the price.

we will obviously deliver much better models and also it’s legit invigorating to have a new competitor! we will pull up some releases.

Altman’s comments suggest that the DeepSeek threat is real. And as a result, OpenAI will “pull up some releases”, meaning they will accelerate the release of more advanced models.

Last Friday, OpenAI took the first step. They released “Operator” to Pro users ($200/month). Operator is an AI agent which can directly control your computer and complete tasks on your behalf.

This is likely a model which was ready for some time, but was held back due to safety concerns. Imagine what hackers and scammers could do with an upgraded version of ChatGPT which can control your computer! Look ma, no hands!

Those safety concerns are now out the window. Legitimate competition from China has emerged, and winning is now the only thing that matters.

OpenAI, Anthropic, and Google will go full speed ahead. Think about how powerful these reasoning AI agents will be. Eventually they’ll be able to do your taxes, check emails, and complete work tasks.

With President Trump back in the White House, domestic AI companies will finally be able to unleash their full potential.

Will it be enough? The continued dominance of America’s tech sector depends on the answer to this question.

The Fate of NVIDIA

After a brutal -17% loss yesterday, NVIDIA is recovering as I write this. Shares are up 6.5% at 12:30 PM eastern.

But I’m not convinced we’re in the clear yet. We won’t really know how meaningful DeepSeek’s breakthroughs are for a few weeks.

Other research labs need to replicate DeepSeek’s work in order to reach a concrete conclusion. It will take a bit for competitors to figure out the kinks and attempt to duplicate their work.

But what we’re seeing from AI leaders continues to indicate that the threat is legitimate. Here’s more from OpenAI CEO Sam Altman:

but mostly we are excited to continue to execute on our research roadmap and believe more compute is more important now than ever before to succeed at our mission.

the world is going to want to use a LOT of ai, and really be quite amazed by the next gen models coming.

Translation: Having huge amounts of top-end NVIDIA GPUs is now more important than ever. This argument is common among the Silicon Valley tech elite.

The theory is that these efficiency advances will make AI even more powerful, affordable, and accessible, which will lead to a huge spike in demand.

I think over a longer period, it may prove correct. When these powerful reasoning models become cheap and widely adopted, the results will indeed be staggering and disruptive.

But over the short run, I’m not fully convinced NVIDIA sales won’t be harmed. At least for the next year or so.

Part of the problem is that China is also making advances when it comes to AI hardware which competes directly with NVIDIA. They are still 2-4 years behind, but they have a strong incentive to build domestic alternatives.

It will be very interesting to see if Trump puts further restrictions on GPU exports to China. He could cut them off completely.

He could even restrict American access to Chinese models like DeepSeek R1. This would be tricky due to the open-source nature of R1. It would be relatively straightforward to outlaw its use, but enforcement would be more difficult.

My hope is that the U.S. can step up and compete on a level playing field. I strongly believe that using sanctions to win the AI war would continue to backfire.

Americans have a truly unique entrepreneurial spirit, and we need to tap into that to win the AI race against China. It has become clear that we won’t win by trying to thwart our competitors.

The Biden admin set us back a ways, and now it’s time to catch up.

 

Adam Sharp has been a financial writer and Fed watcher since 2008. He is a contrarian who specializes in non-traditional assets. Adam founded and sold Early Investing, a newsletter about alternative investments. Sharp lives in Maryland with his wife, two children, and two dogs.

 

 

 

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