How DeepSeek’s Breakthrough is Backfiring on UAE-US Investment Plans

Saudi may view this development as a precautionary warning, dropping the idea of divesting from the Chinese AI industry.

On Tuesday, 28 January, Chinese AI start-up DeepSeek caused a historic shock in the AI market, triggering a crash within the industry after launching DeepSeek-R1, a language model similar to OpenAI’s ChatGPT but operating at a fraction of the cost. The leading American AI company, Nvidia, lost a record $588.8 billion in market value, the most a stock has lost in a single day. Western AI companies like OpenAI and Meta have repeatedly stated that they need to invest billions of dollars to stay competitive, yet DeepSeek’s R1 has reportedly cost about $5.5 million to develop. This breakthrough comes despite American sanctions aimed at sabotaging China’s tech sector to maintain the US lead in the field, including the recently announced $500 billion Stargate initiative. Given the UAE’s recent multibillion-dollar investments in the U.S. AI industry and its retreat from the Chinese AI market, the DeepSeek saga underscores the flaws in the UAE’s balancing act between the US and BRICS.