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BRUSSELS — In just a week, Europe saw its artificial intelligence scene floundering in the face of American flexing, only to see it rebound with the rise of a Chinese rival.
A little-known Chinese AI model, DeepSeek, emerged as a fierce competitor to United States’ industry leaders this weekend, when it launched a competitive model it claimed was created at a fraction of the cost of champions like OpenAI. President Donald Trump on Tuesday called it a “wake-up call” for the American tech sector.
In Europe, it could mean something entirely different: A welcome signal that its own AI industry has a fighting chance against the full force of American national capitalism in the global AI arms race.
“High-quality efficient AI models are no longer the exclusive domain of tech giants with huge hardware resources,” said Lucie Aimée Kaffee, EU policy lead and applied researcher at Hugging Face, an open-source AI development platform.
Europe could compete on “efficiency, specialisation and responsible AI development” with “small” AI models like DeepSeek, she said.
Trump presented his opening gambit in the AI race on his first day in office last week, presenting an industry-led €500 billion AI hardware plan, strengthening the belief that financial firepower is what will determine who wins the AI race.
DeepSeek over the weekend claimed its new reasoning model R1 rivals that of U.S.-based AI posterchild OpenAI, one of the driving forces between the $500 billion plan, and said the costs of training an earlier released model were “economical,” estimated at under $6 million.
The rise of a Chinese budget competitor led to a market sell-off on Monday: U.S. AI chip designer Nvidia lost close to $600 billion in valuation.
Europe doesn’t have the tech giants able to splash billions of euros on the AI hardware needed to train models. Last week, that was seen as a crippling factor.
But the rise of DeepSeek suggests European leading firms like France’s Mistral, Germany’s Aleph Alpha and many other, smaller ventures could also gain ground in the AI race — perhaps even on the cheap.
“This shows that the race for AI is far from being over,” European Commission spokesperson Thomas Regnier told reporters on Tuesday in Brussels.
Some saw in DeepSeek’s rise a sign that Europe’s lack of cash to splash on massive computing power won’t necessarily hold it back in the AI race. Others focused on the effect that it would bring down costs for AI developers.
DeepSeek’s app rose to the top of the app store rankings. It is free to download, and the model itself is open and accessible on the developer platform GitHub without many restrictions on how it can be reused.
OpenAI’s rival model, o1, is reserved for paid subscribers.
“[Startup] founders building at the application level have just been handed a way to achieve good performance at a significantly lower cost,” said Nathan Benaich, general partner at the AI-focused firm Air Street Capital.
Building actual AI applications on top of an existing model is one area where Europe can still win, Meta’s outgoing top lobbyist Nick Clegg said on a panel at the World Economic Forum in Davos last week.
Yet, companies should also be on guard.
Many users tinkering with DeepSeek’s model noticed that the chatbot refrains from discussing topics that fall under the Chinese Communist Party’s censorship regime. For example, users flagged the app refused to respond to queries about the 1989 Tiananmen Massacre. Others saw in DeepSeek’s privacy policy that the company collects keystroke patterns.
“If you’re working on certain sensitive applications, you should beware [of] Chinese labs bearing gifts,” said Benaich.
European lawmakers are also closely watching the developments and the risks.
“It’s quite something that you store keystroke patterns, on Chinese servers,” said Dutch liberal member of the European Parliament Bart Groothuis.
“It also influences the way we are searching, the way we are thinking, how information is being provided,” he added. “It should not have its place in the EU.”
