How China’s DeepSeek quietly outpaced the US in the global AI race
“Small” AI startup shows how China can compete with Silicon Valley and Southeast Asia’s startup woes continue
Good morning,
DeepSeek is the tech company on everyone’s lips and mind right now after the Chinese AI startup launched a major update that put it, and Chinese AI tech, on the map.
The company has won praise for building an AI system that appears to be at least on par with the best of Silicon Valley, and it did it on a budget whilst building in public. That’s quite the accomplishment and it shows that despite restrictions on tech, China is still a world force.
Elsewhere this week, there’s startup woe and more details of fraud in Southeast Asia, and OpenAI is walking into a battle with no clear path to winning in India.
Happy Lunar New Year to those who celebrate it—the weekly review will return next Monday.
Best,
Jon
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News in Focus
China’s DeepSeek shocks the Valley
The wildest story in quite some time is DeepSeek, a Chinese AI startup that has released a new AI product that rivals—if not outperforms—the technology from Silicon Valley giants like OpenAI, Google DeepMind, Meta, and others.
The buzz around DeepSeek stems from the fact that not only has it been building in public with open-source code, but it has also managed to develop an impressive product at a fraction of the cost incurred by America’s tech giants. This excellent FT profile piece on the “small” company claims it spent just over $5 million to train its AI.
Here’s what else you need to know:
DeepSeek is founded and bankrolled by billionaire Liang Wenfeng, a hedge fund master who jumped into AI for trading and then decided to spin out his own AI-dedicated startup
Liang’s hedge fund, High-Flyer, finances DeepSeek and was responsible for its initial team
DeepSeek is staffed with Chinese AI experts, including top PhD grads and talent nabbed from tech giants like ByteDance and Tencent
Liang was the sole representative for AI to attend a recent government-private sector event with key leaders
DeepSeek’s app is currently flying high in app stores—but yes it doesn’t answer sensitive topics around China
And further reading:
We wrote before that Chinese AI companies are having to scrap hard with limited access to top-of-the-range tech, internet restrictions and talent bleeding to the US, and those factors have helped DeepSeek and others find different ways to develop technology.
DeepSeek isn’t alone in making moves in China. ByteDance plans to spend over $12 billion on AI infrastructure in the US this year as part of a bigger $20 billion play, half of which will go to data centres and equipment. Huawei is also positioning itself as a key enabler, given the challenge of getting Nvidia tech and incoming US restrictions. Then there’s China’s new AI investment fund which comes with $8 billion in initial capital with the goal of backing the nation following the US tightening export controls on advanced semiconductors and other tech.
OpenAI runs into trouble in India
OpenAi is in a legal pickle in India, Reuters reports:
OpenAI has told an Indian court that any order to remove training data powering its ChatGPT service would be inconsistent with its legal obligations in the United States, according to a recent filing seen by Reuters.
The Microsoft-backed AI firm also said that it was not within the jurisdiction of Indian courts to hear a copyright breach case brought by local news agency ANI as OpenAI had no presence in the country.
The floodgates have opened and a suit has been filed by the Federation of Indian Publishers asking the tech firm to cease use of materials from the publishers it represents.
Media and AI have long clashed over copyright and it feels hard to see this finding an easy resolution. Could OpenAI leave India? What does that even mean for a global software business and how would it impact business and tech in India? What’s the alternative?
Meanwhile, India plans to liaise with the Trump administration over the Biden Presidency’s move to regulate AI, which would impact countries beyond China as we explained last week in ATR.
Southeast Asia’s startup funding decline continues
This year is looking like a tough one for startups in Southeast Asia and a new funding report from Deal Street Asia puts numbers on the challenge with funding and other key indicators down for a third consecutive year.
Key Points:
Funding down 42%: Funding dropped to $4.56 billion in 2024, down 42% year-over-year; deal count fell by 10% to 633
Southeast Asia not a priority: Investors are retreating from Southeast Asia, focusing on core markets amid global economic shifts
Covid highs: Startup funding peaked at $23.4 billion in 2021 during low interest rates and digital service growth spurred by COVID-19.
Regional comparison: While Southeast Asia's funding fell, US venture financing increased by 30%, and China's decreased by 40%.
Early stage beats late stage: Late-stage investments plummeted by 64% with only 21 deals, raising $1.23 billion, the first time in six years it was less than early-stage investments.
EFishery reportedly faked revenue and profit, and kept dual accounts
One story that isn’t helping Southeast Asia’s startup scene arrest its slump is eFishery. Details on the misconduct that saw two co-founders leave last year have come to light and they are ugly:
[The startup] had inflated its revenue for the first nine months of 2024 by nearly fivefold and manipulated its bottom line to appear profitable despite posting massive losses.
As previously reported, the management had been maintaining two sets of accounting records since at least 2018, one for select company leadership and another for external use, including for shareholders, banks and auditors, creating a misleading narrative on the financial trajectory of the company.
EFishery was widely heralded after growing to a $1 billion valuation thanks to investment from Temasek, SoftBank and others. The startup had even been making IPO plans. These details are an embarrassment to all involved.
Trump’s TikTok debacle ticks along
Trump is again turning to Oracle to find a solution for TikTok’s US business. Trump previously pushed a deal back in 2020 and the new version of it looks like this:
American investors would hold a majority stake, though terms are still being finalised
ByteDance would retain a minority stake
Oracle would oversee the app’s algorithm, data collection, and software updates
“Oracle’s role would be to monitor and oversee TikTok’s operations,” a source told NPR. “ByteDance wouldn’t disappear entirely, but Chinese ownership would be significantly reduced.” (Perplexity AI’s proposed merger may be one other candidate.)
ByteDance is reportedly looking at other options that don’t require it to sell its business, but that’s hard to see.
China
Another Chinese IPO in the US is looming with Inceptio Technology, a firm specializing in autonomous driving solutions for heavy-duty trucks, said to be weighing a float to raise $100M-$200M link
Autonomous driving firm WeRide—which just went public—plans to expand its robotaxis overseas into Japan, Europe, and the Middle East link
China’s grip on the global drone market is pushing US companies to seek alternatives, with Taiwan positioning itself as a key player in building a “democratic supply chain” link
ByteDance is urging Chinese staff at its Singapore headquarters to pay taxes to China or risk losing access to stock options, amid Beijing's stricter global tax enforcement link
Shanghai is considering allowing businesses in select areas to bypass the Great Firewall and access overseas websites, aiming to attract more foreign investment in 2025 link
India
Hindustan Unilever will acquire beauty startup Minimalist for $342M, targeting India’s premium skincare market—the deal is an initial 90.5% stake through secondary buyouts and primary investment with the remaining 9.5% to be purchased from the founders within two years link
PE firm Everstone acquired a majority stake in Wingify, one of India’s first bootstrapped SaaS success stories, for about $200M, according to sources—Wingify’s annual revenue recently hit $50M link
India sent notices to Uber and Ola over apparently pricing disparity on their ride-hailing services based on whether customers own Apple or Android phones—Uber denied the accusation link
Ati Motors, a startup specializing in autonomous mobile robots (AMRs), raised $20M to fuel its global expansion link
Reliance Group is building what could become the world’s largest data center by capacity in Jamnagar, India, to meet surging demand for AI services link
Zomato shares dropped 13% after profit fell 57% as losses in its Blinkit quick delivery service widened and income missed forecasts link
One of its major competitors, Zepto, is reportedly in talks to increase its IPO fundraise to $800M-$1B in anticipation for even more bitter competition link
Oyo is another read to go public with reports suggesting it could file papers in the first quarter of this year link
Paytm is aiming to be profitable within the next 6 months, moving on from its regulatory issues last year link
An Indian tribunal has suspended the Competition Commission of India’s five-year ban on WhatsApp sharing data with Meta apps like Facebook and Instagram for ads link
India's Enforcement Directorate froze around $150M from payment gateways over a cryptocurrency scam operated by 10 Chinese nationals link
Tata Electronics acquired a 60% stake in Pegatron’s Indian unit to boost its iPhone manufacturing chops link
Southeast Asia
Indonesia’s antitrust agency fined Google $12.37M for unfair business practices involving its Google Play Store payment system, which is alleged to have abused its dominant position by forcing app developers to use Google Pay Billing at higher rates link
Indonesia is said to be nearing a deal with Apple to secure an investment that would lift the iPhone 16 sales ban, a government minister said link
North Korean hackers are suspected of a $70M exploit on Singapore-based crypto exchange Phemex link
The US has approved a landing license for the Bifrost Cable System, the first subsea cable directly linking Singapore to the US west coast link
South Korea
SK Hynix reported a record quarterly profit of $5.64B driven by strong sales of high-bandwidth memory (HBM) chips used in generative AI link
Japan
SoftBank shares rose 12% after details of a $500B AI partnership with the Japanese firm, OpenAI, Oracle and others were announced for the US market, a project heralded by President Trump link
Rest of Asia
Pakistan’s lower house of parliament on Thursday passed a controversial bill that will give the government sweeping controls on social media, including sending users to prison for spreading disinformation link
A newly discovered Chinese state-sponsored hacker group, PlushDaemon, has been targeting East Asian users in an espionage campaign link
The Justice Department indicted five individuals for helping North Koreans secure jobs at 64 US companies, earning hundreds of thousands for Pyongyang link
Lawmakers in key Asian digital-asset markets are softening their stance on crypto as Donald Trump’s pro-crypto agenda influences the region—officials in Thailand, Malaysia, and Japan have signaled policy shifts since the start of the year link
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