Is DeepSeek AI a Blessing or a Curse for the Generative AI Industry?

By Richard Sebaggala

DeepSeek AI's entry into the generative AI race has sparked debate about what this means for the industry, competition, and the future of artificial intelligence. Some see it as a sign of progress, a force that will drive innovation and reduce costs. Others fear that this is another step towards an AI arms race that will take us further into uncharted territory where the risks outweigh the benefits. As economists, it is impossible to ignore the fact that this is not just a technological shift, but also an economic and geopolitical one. The big question is whether the arrival of DeepSeek AI is good for the world or whether we are simply moving towards a future that we haven’t fully thought through.

In most industries, competition is a force for good. It leads to better products, lower prices, and better accessibility. The emergence of DeepSeek AI challenges the dominance of OpenAI, Google DeepMind, and Anthropic and brings a new player into what is starting to feel like an exclusive club.  As Apple and Android went head-to-head, smartphones got better and more affordable. As budget airlines entered the market, flying became accessible to more people. DeepSeek AI could have a similar effect: AI tools are becoming cheaper, smarter, and more widely available. In addition, the accessibility of AI is a major concern. Currently, developing AI models at scale is costly, and access to leading technologies is often limited. If DeepSeek AI aggressively pushes into the market, it could force incumbents to rethink their pricing strategies and make AI more affordable for small businesses, researchers, and developing countries. This democratization of knowledge and computing power is a compelling argument for more competition.

However, more competition does not always lead to better results. It can lead to reckless behavior when companies prioritize speed over safety. The AI industry is already in the process of developing larger models without fully understanding their long-term implications. The entry of DeepSeek AI means that all players may feel pressured to accelerate their development cycles, which could lead to the use of unfinished technologies and the neglect of ethical considerations. The nature of the generative AI industry raises unique concerns. Unlike traditional markets, which typically involve the exchange of goods and services between buyers and sellers, the impact of AI extends far beyond consumers and businesses and can reshape entire economies, influence policy decisions, and change labor markets. This raises critical questions about how the market for AI will evolve, particularly in terms of its structure and competitive dynamics.

A key question is whether the emergence of DeepSeek AI signals the development of a truly contestable market or whether the industry will continue to be dominated by existing players. In economics, a contestable market refers to a market where entry and exit are relatively easy, meaning that new companies can challenge incumbents without major obstacles. In such markets, even a monopoly behaves competitively because the threat of potential entrants keeps prices fair and innovation high. In the AI industry, however, the presence of first-mover advantage —when early entrants establish a strong position by developing superior technologies, amassing big data, and building brand awareness — can solidify the control of existing giants such as OpenAI, Google DeepMind, and Anthropic.

DeepSeek AI’s strategy may be similar to OpenAI’s approach, which favors rapid adoption of its technology over immediate profitability. This is a common tactic in technology markets, where early market dominance can be more valuable in the long term than short-term revenue. However, the AI industry is characterized by network effects, i.e. the value of a service increases the more people use it. This and the huge demand for data and computing resources make it difficult for new entrants to compete on an equal footing with established market players who already have access to huge data sets, powerful computing infrastructure, and strong industry partnerships. The key question remains: Does DeepSeek AI’s entry signify a real power shift in the AI industry, where competition is thriving and innovation is flourishing? Or is the company merely adding another player to an already established system dominated by a few tech giants that are more likely to maintain the status quo than change it?

Furthermore, fragmentation is a significant risk. If AI development splits into competing ecosystems — one dominated by Western companies like OpenAI and Google, and another led by China’s DeepSeek AI and others — we could end up with two separate AI worlds. Competing AI ecosystems, possibly divided along geopolitical lines, could lead to different standards of safety, ethics, and governance. This is particularly worrying given that AI has the potential to disrupt economies and political systems. If AI development becomes a race for supremacy rather than a collaborative effort for global improvement, it could have detrimental consequences.

The presence of DeepSeek AI is therefore a double-edged sword. It offers the potential benefits of competition — faster innovation, better prices and improved access — but also carries the risks of fragmentation, reckless deployment and a focus on dominance rather than accountability. The key question is not whether DeepSeek AI is inherently good or bad, but whether we can effectively manage the impact of an industry that exceeds our ability to control it. AI is now about power, politics and economics. As history shows, those who set the rules for emerging technologies ultimately determine their impact on the world. We pray and hope that those governing AI will prioritize ethical responsibility, global cooperation, and the collective good over short-term gains and geopolitical rivalry. The future of AI should be shaped not only by competition but by wisdom and foresight.