American capitalism just got a black eyeThe story behind today's stock market tank
Friends, Sorry to intrude on your inbox again today, but I thought you’d like to know why the stock market tanked this morning. Late last week, a little-known Chinese artificial intelligence start-up called DeepSeek revealed that it had come up with more advanced Artificial Intelligence than America’s Big Tech companies, and at a tiny fraction of the cost — even without access to America’s advanced chip technology. To add insult to injury, DeepSeek has made its technology “open source” — that is, available to everyone. The lesson here is that Microsoft, Amazon, Meta, and Google became too big, fat, and musclebound to remain sufficiently innovative. Instead of out-of-the-box invention, they specialized in marginal improvements. By contrast, Chinese tech corporations compete fiercely with each other. This has put them on the cutting edge — and why China has been able to come up with startling innovations (not only in AI but in electric vehicles, batteries, even TikTok and much more). China’s secret sauce hasn’t been big subsidies from the Chinese government creating giant “national champions.” It’s been intense competition. Lina Khan, Biden’s chair of the Federal Trade Commission — who sued Big Tech for monopolizing the market — correctly pointed out last March that the United States could not stay on the cutting edge by relying on giant “national champions.”
So what happened to the stock market this morning? Much of its recent valuation has been based on gigantic bets on artificial intelligence — in which big tech has been investing hundreds of billions of dollars in data centers and energy capacity it assumed it needed to get to the next generation of AI. Wrong. America is going to have to rethink our entire approach to technology. We may also have to rethink our approach to capitalism. So glad you can be here today. Please consider becoming a paid subscriber of this community so we can do even more. © 2025 Robert Reich |