DeepSeek AI recent Rise has prompted some Markets analysts to suggest this could aid in strengthening the Chinese yuan and dethrone the US dollar’s global dominance.
The Chinese AI has been eating into America’s AI edge and the tech industry as a whole. The US stock market, which is tech-heavy, has been one of the strong pillars that have supported the US dollar’s global standing.
In January, DeepSeek drove the AI industry into delight and turmoil after it launched its AI-powered chatbot at the fraction of the price of others, and challenged US-made generative AI models like OpenAI’s ChatGPT and Google’s Gemini.
Now, discussions around DeepSeek’s rapid rise have taken on a new twist. Some market watchers opine the world might also see the rise of the Chinese yuan as a global currency ahead of the US dollar.
A London-based asset management firm Ninety One noted that DeepSeek’s rise could erode one of the key pillars that anchor the US currency’s global dominance, that is the tech-heavy US stock market.
“If DeepSeek’s efficiency gains are verified, it is likely to lead to lower investment requirements and a flattening of technology barriers at a global level,” a Ninety One’s multi-asset portfolio manager Alex Holroyd-Jones notes.
“Both will implicitly benefit energy-poor regions and relative tech laggards, thereby undermining one pillar of US exceptionalism.” he added.
Jones identified three pillars that have always supported the US dollar’s global dominance. These are expansionary government policy, higher interest rates, and technological leadership, where the US has been at the forefront of technological innovations, particularly AI.
US’ tech leadership has been a strong pillar that helped attract global investors ahead of other economies like China.
However, the rise of DeepSeek in January sparked a US AI stock sell-off and fueled calls for a re-evaluation of tech stocks.
DeepSeek dropped another open source model on Jan. 27, further sending US stocks into mayhem with chip making firm Nvidia experiencing its biggest decline in a single day.
This also came as the Chinese startup further claimed the superiority of its model in a technical report on Monday.
DeepSeek said its model outclassed rivals from OpenAI and Stability AI on rankings for image generation using text prompts.
As markets continue to gauge the technological impact, as well as its asset price implications, a key question emerges – could China’s technological breakthrough challenge American exceptionalism – the outperformance of US risk assets and the US dollar relative to global markets?.
Already, some investors are shifting their attention and becoming intrigued with Chinese AI stocks, slowly helping the Asian country regain appeal. As per an earlier JULISHA.CO.KE report, after establishing multiple crackdowns, China has now pushed away several key investors who sought new markets in India and other Asian counterparts.
The startup has reportedly spurred an additional $1.3 trillion into the Chinese equity markets in a month as hedge funds have been pouring more investments into stocks driven by growing hopes for additional economic stimulus and the chatbot’s growth.
