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DeepSeek: the new Covid? How a false AI narrative wiped out billions

Writer's picture: Ken PhilipsKen Philips


Yesterday, we asked DeepSeek a straightforward question: “Who is the President of Taiwan?” The response we received was not an objective fact but a politically controlled narrative. DeepSeek refused to acknowledge Taiwan’s democratically elected leader and instead echoed the Chinese Communist Party’s (CCP) stance that Taiwan is merely a “region of China.”


This alarming response underscores a deeper issue: China’s latest AI project, DeepSeek, is not just a competitor in artificial intelligence but a weapon of information control, economic manipulation, and geopolitical influence. This AI system follows a pattern eerily similar to the early days of the COVID-19 pandemic, where misinformation, lack of transparency, and economic disruption played key roles in shifting global dynamics.

While the two crises are vastly different in nature, they share a core similarity: China’s strategic use of opacity and misleading narratives to influence global markets.


The DeepSeek deception: a false AI cost narrative


DeepSeek, a Chinese AI firm positioning itself as a competitor to OpenAI and Google’s Gemini, recently made waves by claiming it had achieved low-cost AI model development. This statement sent shockwaves through financial markets, leading investors to believe that AI firms no longer needed the most advanced Nvidia GPUs, a revelation that contributed to a significant decline in Nvidia’s stock price and wiped out billions in market cap.

However, deeper analysis revealed the opposite:

  • DeepSeek was forced to use Nvidia’s downgraded H800 GPUs due to U.S. export restrictions.

  • If they had access to the more powerful H100 GPUs, their AI training would have been 57% cheaper ($21.45M instead of $50M).

  • The cost inefficiency was not a strategic choice; it was a forced adaptation due to geopolitical constraints.


The Economic Impact: billions wiped out


The markets reacted not to facts, but to perception. DeepSeek’s misleading cost claims led investors to assume:

  1. AI firms were finding ways to cut costs significantly.

  2. Nvidia’s pricing power and long-term demand for high-end GPUs were weakening.

  3. AI companies could optimize around less powerful chips, reducing reliance on U.S. technology.

These assumptions triggered a sell-off in Nvidia and AI-related stocks, causing a billion-dollar shockwave in U.S. markets, all based on a false premise.


Parallels to COVID-19: China’s playbook doesn’t change


The DeepSeek incident is not an isolated event—it fits a familiar pattern observed during the early days of COVID-19: China’s use of misinformation, lack of transparency, and economic disruption to shift global dynamics.

COVID-19 Crisis

DeepSeek AI Manipulation

Lack of transparency on virus origins and early data

Lack of transparency on AI training costs

Misinformation about case numbers, mortality rates

Misinformation about DeepSeek’s development costs

Suppression of independent research challenging China’s official narrative

Politically controlled AI that follows CCP-approved positions

Global economic disruption caused by early cover-ups

Billions in market cap wiped from U.S. tech stocks

Long-term impact: supply chain disruptions and global decoupling from China

Potential long-term impact: AI decoupling and stricter scrutiny on Chinese firms

DeepSeek and the Taiwan issue: politically controlled AI


The DeepSeek reply to our question also highlights the broader issue of China’s control over AI narratives. One clear example is how DeepSeek and similar Chinese AI models refuse to acknowledge Taiwan as an independent entity. Instead, they strictly follow the CCP’s official stance, referring to Taiwan as a “region of China” and avoiding any acknowledgment of its democratically elected leadership.


This is a stark reminder that Chinese AI is not neutral, it is a tool of political control. Just as China censors discussions on Taiwan, Hong Kong, and Xinjiang in its domestic media, it also ensures that AI models do not contradict state propaganda. The long-term danger is that as these AI models expand globally, they could subtly reshape perceptions and narratives to align with China’s geopolitical goals.


Is AI the new battlefield?

China’s ability to influence global markets through AI-driven misinformation and economic manipulation presents a long-term challenge. The DeepSeek incident highlights three major concerns:


  1. AI as a Tool of Narrative Control

    • Just as China censors politically sensitive topics, AI developed under CCP oversight will never be neutral.

    • DeepSeek’s stance on Taiwan, for example, reflects government-controlled perspectives rather than objective reality.

  2. Economic Warfare Without Firing a Shot

    • By spreading misleading AI cost claims, China effectively triggered a financial attack on U.S. markets without direct intervention.

    • This is a form of hybrid warfare, where stock market volatility replaces traditional conflict.

  3. China’s Long-Term AI Strategy

    • If export restrictions persist, China will accelerate domestic AI chip development to reduce reliance on Nvidia and other U.S. suppliers.

    • The AI arms race is not just about technology, but about who controls the global AI narrative.


Preventing the next DeepSeek “pandemic”


Just as COVID-19 exposed vulnerabilities in global health security, the DeepSeek incident reveals vulnerabilities in AI governance and market stability. The following steps may be necessary to prevent future manipulation:

  • Stronger fact-checking for AI-related claims to prevent false narratives from misleading markets.

  • Stricter regulations on AI firms making misleading cost or performance statements.

  • Less reliance on Chinese AI infrastructure, reducing exposure to manipulated narratives and economic risks.

  • Proactive countermeasures to anticipate and mitigate China’s ability to influence Western markets through AI-driven misinformation.


DeepSeek is a warning, not an isolated event


The DeepSeek deception should not be viewed as a one-time market misstep; it is a glimpse into the future of AI-driven economic manipulation, misinformation, and geopolitical competition. If left unchecked, AI could become the next great tool in hybrid warfare, capable of reshaping financial markets, political narratives, and global power structures without a single shot being fired.


The question is no longer whether AI will be weaponized; it already has been. The real challenge is ensuring that truth, transparency, and economic stability don’t become the first casualties in this new era of information warfare.

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