The launch of DeepSeek's AI model has not only sparked market turmoil but also a flurry of activity in Washington, where the Trump administration is grappling with how to respond, analysts at Evercore ISI said in a note Tuesday.
Evercore described the developments as a “wake-up call for the U.S. industry” and a major policy challenge for the new administration.
DeepSeek, a Chinese AI company, has launched a model that it says rivals the capabilities of US tech giants at a fraction of the cost.
Analysts noted that the news has reignited debate about the effectiveness of U.S. export controls. Some argue that they have spurred innovation in China, while others believe they are not effective enough.
“Are Biden’s semiconductor export controls too much or too little?” Evercore ISI analysts asked, suggesting the Trump administration may revisit these policies.
There are also questions about how to regulate AI models and data directly. Analysts point out that the Biden administration focused on hardware restrictions but only began to address model weight and related issues late in his term.
They hope the Trump administration will explore broader restrictions, potentially targeting U.S. investment in Chinese AI or even the ability of Chinese citizens to study AI in the U.S.
National security concerns loom large. “Trump could, in theory, seek to ban DeepSeek using the International Emergency Economic Powers Act,” analysts said, though they noted the complications posed by DeepSeek’s open-source nature.
The administration will also likely leverage its close relationships with tech leaders to inform policy. But Evercore ISI warned of potential divisions: “It’s unlikely Trump will get a unanimous recommendation here,” given divergent business interests and national security concerns.
Ultimately, analysts expect a more rapid push to strengthen US AI dominance, with a focus on deregulation, defense applications and reducing costs for domestic developers.