Last month, tech giants in the United States (US) were dealt a blow of $1 trillion by DeepSeek, a relatively unknown artificial intelligence (AI) startup from the People’s Republic of China (PRC). NVidia, a US company at the forefront of the AI revolution, lost over $600 billion in market value alone – the biggest one-day market capitalisation wipeout in history.
It had been assumed the PRC’s AI companies were far behind US powerhouses such as OpenAI, but DeepSeek’s new model caused shockwaves by seeming to show this is not the case.
DeepSeek’s model can perform as well as, if not better than, models developed by OpenAI, Google, Meta and Anthropic – seemingly at a fraction of the cost and resources. But DeepSeek’s model appears to be built on OpenAI’s data, and some have called into question DeepSeek’s claimed budget and chip use – as well as the model’s reported censorship around issues such as the Tiananmen Square and Taiwan.
This development came just a week after US President Donald Trump unveiled the $100bn Stargate AI infrastructure project, which will increase to $500bn over the next four years. Stargate was already in development before Trump’s inauguration, but the full scale of US ambition is now apparent. The need for such large infrastructure investment has now been called into question by DeepSeek’s new model.
The development of DeepSeek’s model has been called AI’s ‘Sputnik moment’, a reference to the Soviet Union’s launch of the world’s first artificial satellite, Sputnik 1, which took the world by surprise and caused a crisis about the perceived technological gap between the Soviet Union and the United States.
So, how important are these developments for the United Kingdom (UK)?
In January, Sir Keir Starmer, Prime Minister, shared Matt Clifford’s AI Opportunities Action Plan, which received widespread approval. The government hopes this plan will help the UK harness AI to accelerate economic growth and deliver ‘a decade of national renewal’. The plan, as the government has vividly put it, ‘mainlines AI into the veins’ of the nation.
The Prime Minister was correct to write that ‘shaping a successful AI future for Britain requires us to act and invest now. Failure to do so will condemn us to merely obeying decisions made by others beyond our borders.’
And the unveiling of this plan shows the government is indeed serious in its ambition to foster a thriving AI ecosystem in the UK. The plan includes new AI Growth Zones to speed up planning proposals, building more AI infrastructure, increasing public compute capacity, and creating a National Data Library. These measures are a step toward nurturing a dynamic AI sector in Britain, attracting top talent, and fostering innovation.
But since the announcement of the UK’s AI Opportunities Action Plan, these developments in the US and the PRC have disrupted the landscape. Where does that leave the UK and its efforts in AI?
It’s clear the UK simply cannot compete with the US and PRC when it comes to spending on AI infrastructure. Instead, Britain needs to forge its own path to drive innovation. The UK should leverage its advantages in fundamental AI research, its wider research ecosystem, and its strengths in AI safety and governance. And, the UK should be the global champion of open-source innovation.
A major study at the Council on Geostrategy surveyed entrepreneurs and innovators last year to understand the barriers they face in growing their businesses in Britain. This study identified weak business investment, limited access to R&D infrastructure, and an incoherent strategy as just some of the problems facing those working at the cutting edge of science and technology.
The AI Opportunities Action Plan addresses several of these challenges. The government has stated some £14 billion has been committed by private firms following the plan. That is a positive step, and will help Britain on this path to achieving growth.
At the same time, we need more of this from the government: a recognition of the scale of the challenges Britain faces, and clear, bold roadmaps for how to address them. This provides a degree of certainty and stability for investors in an environment where this has been lacking in recent years. The clarity of this plan represents a marked contrast to the piecemeal approach that seemed to characterise the government’s initial period in office.
The UK’s AI Opportunities Plan also stressed the importance of tapping into technologies such as Small Modular Reactors (SMR) to help meet the high energy demands of AI. This support for SMRs also reflects recent research by the Council on Geostrategy, which has called for the UK to do more to support its domestic enterprises. The government has recently acted on this by announcing a nuclear regulatory taskforce to speed up SMR development.
At the moment, the AI Opportunities Action Plan remains just a plan. The US Stargate project shows there will be challenges in the global struggle for talent and capital, while the PRC’s DeepSeek highlights how rapidly the landscape is evolving, as well as concerns over data and national security. In Britain, success will ultimately be determined by whether the government can effectively execute this plan and how the UK positions itself going forward. Britain should position itself as a leader in fundamental AI research and innovation, and a champion of open-source innovation.
If you enjoyed this piece, click here to read Dr Mann Virdee’s previous piece for the PB blog.
