The unveiling of DeepSeek AI has revealed the flimsy foundations of the tech-company boom on which so much capitalist hope has been based, argues Kevin Crane

Pride comes before a fall, as they say. For exactly one week, the second Donald Trump administration came across like a fully developed new world order. The once-and-future president strode, flush from a landslide electoral victory into an inauguration ceremony that was intended to symbolise his consolidation of absolute power and his forging of an alliance at the top of American society that represented both the remaking and untouchability of the social, political and economic elites of both the country and the planet.

The defining image of this brave new world was that of Facebook and Amazon CEOs Mark Zuckerberg and Jeff Bezos, both of them previous Trump critics, proudly attending in person having given a million dollars each to a man from whom they used to be a pains to distance themselves. They joined their frenemy, Tesla/SpaceX boss Elon Musk, an early convert to the Make America Great Again movement, and their cash donations were matched by the CEOs of Uber and OpenAI, Dara Khosrowshahi and Sam Altman.

The sense of triumph by this alliance of Big Tech capital behind the revived far right was only increased by the fact that Musk could cheerfully make mocking ‘Sieg Heil’ salutes from the podium, and the liberal media felt they could nothing other than pretend it hadn’t happened. After eight years of the global centrist establishment using frantic warnings about the far right to corral the masses into backing them against Trump and other right-wing populists, they were now reduced to a mournful acquiescence before this spectacle.

Both sides of the pact had been doing a series of interrelated victory laps. Trump himself seized the moment – while not busy pardoning neo-Nazi rioters – to launch not one, but two, ‘meme coins’: utterly worthless blockchain-based fake money that he could scam his followers into paying actual money for … or just get directly and secretly bribed by literally any wealthy person in the world. While that was going on, the tech bros have got busy publicly embracing their new political allegiance, none more so that Zuckerberg, who has been making up for lost time and declaring himself as a macho warrior against woke tyranny to catch up to and rival Musk. Both men are about as convincing as each other in this role.

Of course, this was all in aide of Very Serious Business, because what Trump had agreed to do for the support of Big Tech was to ensure that there would be no obstacles whatsoever to their master plan of continuing to build and develop all their hot new technologies. Ok, all the technology is basically just what we’re calling ‘AI’ now, but still, it was all full speed ahead. With full US government backing, the tech companies were going to process more data than ever, consuming more electricity than ever, raising and spending more investor money than ever, in a permanent cycle of expansion with no end in sight, bringing ever more glory to captains of industry and their patron in the White House.

And then, a Chinese company no one had heard of quietly released an app.

This bubble nearly burst once already…

The sudden political shifts in the tech sector were not just prompted by the collapse of the US Democratic Party as a viable government, it was also a response to a serious shock the companies has had on the 5^th of August last year. The massive overvaluation of the ‘magnificent seven’ companies – led by Nvidia, the hardware manufacturer from which the others are buying the kit to make their AI products – suddenly became exposed and hundreds of billions of dollars disappeared almost overnight.

The hype train didn’t quite derail at that point, though. AI is currently venerated by capitalists and politicians around the world as the future, and on that basis the Magnificent 7 managed to round up yet more masses of investor funding to shore up their balance sheets and keep going to get through the next round of updates and releases.

As we said at the time, the whole enterprise is essentially an interlocking set of devious schemes: the Magnificent 7 are ostensibly competitors but act more like a cartel. Their development processes have a lot more in common with Ponzi schemes than profit-making business ventures, and – thanks to the new protectionist policies that Trump brought in his first term – only American companies can get hold of any more of the precious Nvidia processing cards needed to make more of the AI models that everyone else in world has been told that they need to get in on. The fact that none of these things were actually profitable was quietly being ignored.

Like any good scam, a lot of effort has been needed to maintain any illusion of sustainability. Big-money investors (like Saudi Arabia) may have been quite happy to keep pumping in money, but because the companies have had no vision other than to keep going larger, other things have been running out. The obvious one is electricity: the AI models require huge datacentres that just don’t stop demanding more, and the US government has been looking to perform climate-change-target busting operations to get more generation online to meet demand.

The more surprising one is data, because they’ve basically already raided the entire internet to train their awful creations and have been desperately trying to come up with ways to synthesise ‘fake’ data. The thing is, the Big Tech bosses have gotten so used to enjoying the wealth, fame and power that just constantly going bigger has given them, that they’ve felt no need to try anything else. And they were complacent enough to assume no one else was.

…and now someone’s popped it

Tech companies in China have, as mentioned, been denied access to Nvidia’s new super-advanced hardware for some time. They also don’t tend to have access to absurd multi-billion-dollar funding like the American giants do. So, one of them decided to try something the yanks swore off years ago. They did some actual engineering, and asked ‘Can’t we just do this thing, but with less, for less?’

The result was DeepSeek, a new large language model in the ChatGPT mould. It appears to be vastly cheaper than any Western alternative, both to develop (around $6 million, as compared to $100 million for OpenAI’s fourth iteration of ChatGPT) and to operate. More alarmingly, however, is that it is performing better that its competitors according to the metrics those competitors use. But it gets way, way worse than that for American tech.

The killer blow is that DeepSeek has made the algorithms and models open source. That is to say, anyone can use this technology to make their own AI products … without being or working through an AI company. Add to this, Nvidia’s new generations of magic cards have just been demonstrated to be quite unnecessary for future development, and the Magnificent 7 are now gatekeepers on a gate no one, no one at all, needs to go through.

As happened last year, Nvidia’s value drop has been the greatest, but the numbers are even bigger: it’s lost 17% in value, which corresponds to around $600 billion. This is roughly the value that all the affected companies lost back in August! The total losses, when added up on the stock exchange, may run to well in excess of 2 trillion dollars, the biggest stock market drop of all time. Unimaginable quantities of money are just melting into air, as the old saying goes.

Smiles wiped cleanly off dirty faces

Trump’s response so far has been to claim that the DeepSeek’s breakthrough could be ‘Good for us’. He has not explained how, and to be fair he probably couldn’t if there was an explanation. US tech stocks had shown some signs of stabilising by Tuesday, though there is evidence of ‘contagion’ spreading to Japan and activity will naturally slow down right about now for Chinese New Year, appropriately enough. Nvidia’s shares made a partial recovery, but not back to where they were last week (let alone last year), and it really is difficult to see how they can carry on acting as a money-printing machine at this point.

How many more of these panics can the rotten edifice of the tech sector withstand? None would be my guess. This party is coming to an end, and we should be glad to see it go, even if that’s only because that might halt the expansion of data centres and give our losing battle against global warming a very minor boost. But there’s probably reason to be more hopeful than that: when the likes Zuckerberg and Bezos bent the knee to Trump, the mask was finally and permanently ripped from the supposed ‘progressivism’ of this wing of capital. It will be extremely satisfying to see them tumble from the heights of power almost straight away after that.

DeepSeek isn’t an answer to any of our problems, any more than any of the other slop-producing AI travesties have been. What it has done, however, is given the lie to the mess of scams and frauds to which our ruling classes have had us all in hock for many years now. Far from promoting anything like ‘efficiency’ or ‘innovation’, all capitalists have been doing is making fake investments in pointless nonsense to give the illusion that they’ve got a vision for the future. Millions of people see this now, and will be asking themselves: ‘Why do we put up with these idiots in charge?’

This crisis is an opportunity for anti-capitalists and it’s time for us to do the innovation.