In the ever-advancing realm of artificial intelligence (AI), few moments have captured the imagination and attention of the global tech community as much as the launch of DeepSeek in 2025. Developed by a consortium of Chinese tech companies, DeepSeek's introduction was heralded as a transformative leap for domestic AI technology in ChinaIn many ways, DeepSeek's capabilities were perceived as a potential challenge to the industry’s reigning giants, particularly NVIDIA, the undisputed leader in AI-driven hardwareWith performance levels reportedly on par with GPT-4o but requiring only 5% of the computational power, DeepSeek seemed to signal the arrival of a new era in AI processingThis breakthrough was celebrated as a monumental achievement for Chinese technology, positioning China as a formidable player in the global tech arena.

The immediate effects of DeepSeek’s launch were strikingOne of the most dramatic repercussions was the sharp 16.86% decline in NVIDIA’s stock prices, an indication of the shifting tides in the AI hardware marketAs more and more companies took notice of DeepSeek's performance, it seemed clear that the landscape for AI processing was being irrevocably alteredThe narrative painted was one of domestic innovation breaking through the global stranglehold of established foreign players, with China positioning itself to take a central role in shaping the future of AI development.

Yet, as the dust settled, an unexpected paradox emergedFar from signaling a shift towards "light computing" solutions and a reduction in dependence on high-end GPUs, the debut of DeepSeek unleashed a massive surge in demand for the very hardware that it was meant to displaceChinese technology firms, in a scramble to meet the computing requirements for running DeepSeek's sophisticated AI models, found themselves aggressively procuring NVIDIA GPUs—sometimes even discontinued modelsThis unexpected spike in demand underscored the underlying reality that the gap in computational power between domestic and foreign GPUs remains substantial

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Despite the impressive strides made in AI model development, the raw processing power needed to run such models remained largely dependent on NVIDIA’s cutting-edge GPUs.

This phenomenon revealed a key truth: while Chinese manufacturers have made remarkable progress in developing domestic AI solutions, the country’s GPU technology still lags behind in several critical areasStability, reliability, and ecosystem support are just some of the areas where NVIDIA's chips continue to hold an edgeFor many companies, especially those in high-stakes industries where performance consistency is crucial, reliance on foreign GPUs remains a necessityThe paradox of a domestic AI breakthrough leading to an increase in demand for foreign components reflects the complexity of China's AI development journey.

Despite this, there are growing signs of optimismHuawei’s Ascend 910C chip, which can achieve 60% of the performance of NVIDIA’s H100, has emerged as a promising contender in the AI hardware spaceWith the backing of more than 20 domestic chip manufacturers, this chip represents a concrete example of China’s growing capabilities in AI hardwareThere is a sense that, with continued innovation and refinement, Chinese manufacturers could soon close the performance gap with NVIDIA, offering competitive alternatives in the high-end AI hardware market.

In fact, the trajectory of Chinese GPU development over the past few years has been remarkableCompanies like Huawei and Cambricon have made significant strides, pushing the boundaries of what is possible in AI processingThrough continuous investments in research and development (R&D), Chinese firms have refined their chip architectures, leading to noticeable improvements in speed and efficiencyThe Ascend series, in particular, showcases how domestic AI hardware can excel in specific applications, further narrowing the gap with international standardsWhile these advancements have not yet equaled the performance of NVIDIA’s products across the board, they represent an encouraging sign that the tide may soon turn in favor of China’s burgeoning tech industry.

A key factor driving this progress is the active collaboration between companies within the domestic tech ecosystem

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One of the most notable examples is the partnership between DeepSeek and Chinese chip manufacturersRather than simply purchasing off-the-shelf components, these companies have embarked on joint development projects, tailoring chips to meet the specific needs of advanced AI models like DeepSeekThis collaborative approach fosters a deeper integration of AI chip design, software development, and application deploymentBy optimizing domestic chips for specific tasks such as natural language processing, these partnerships create a more cohesive and efficient AI ecosystemThe synergy between hardware and software development is enabling Chinese firms to push the boundaries of AI, while also establishing a robust and self-sustaining technological ecosystem.

On the policy front, the Chinese government’s increasing support for the semiconductor industry has played a pivotal role in accelerating the development of domestic GPUsTax incentives and specialized funding have reduced the financial burden on companies, allowing them to focus more on technological innovationGovernment-backed initiatives have also led to the establishment of specialized educational programs, ensuring a steady pipeline of talent to support the industry’s growthThese efforts are helping to create a conducive environment for semiconductor advancements, providing both the resources and the human capital needed to succeed.

Despite these advances, the path to achieving global market share parity with NVIDIA remains longCurrent data suggests that NVIDIA continues to dominate the global AI hardware market, holding a staggering 80% of the shareIn contrast, domestic Chinese GPUs still represent a relatively small fraction of the marketHowever, as domestic chip technology continues to improve and the supporting industrial ecosystem grows more robust, there are promising signs that this trend will begin to changeWithin China, industries with high data security and autonomy requirements—such as government, finance, and defense—are increasingly turning to domestic GPU solutions

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