How China's DeepSeek Outsmarted US

Take a team of young Chinese engineers, hired by a boss with disdain for experience. Add some clever programming shortcuts, and a loophole in American rules that allowed them to get advanced chips.

- Stu Woo & Raffaele Huang

That is the formula China's DeepSeek used to shock the world with its artificial-intelligence programs.

Conventional thinking held that developing leading AI required loads of expensive, cutting-edge computer chips—and that Chinese companies would have trouble competing because they couldn't get those chips.

DeepSeek defied those predictions with a resourcefulness that led to a $1 trillion blood-bath on Wall Street and is spurring Silicon Valley to rethink its approach.

The Chinese company has also delivered a wake-up call to Washington, according to President Trump, whose administration is set to decide in the coming months what to do about Biden-era policies limiting China's access to the best chips for AI.

DeepSeek's leader, Liang Wenfeng, built his company in the tech hub of Hangzhou, the same city where tech giant Alibaba is based. The AI company grew out of a hedge fund co-founded by Liang that uses AI to find profitable trades in financial markets.

In an interview with a Chinese publication in 2023, Liang said most technical positions were filled by fresh graduates or people with one or two years of experience.

Experience, he said, was a potential obstacle. "When doing something, experienced people will tell you without hesitation that you should do it this way, but inexperienced people will have to repeatedly explore and think seriously about how to do it, and then find a solution that suits the current actual situation," Liang said.

What they came up with is now being studied by Silicon Valley's best and brightest.