Hong Kong "A year after shaking the global AI industry, China’s most disruptive startup is back and the stakes are even higher."

China’s DeepSeek on Friday rolled out a preview of its long-awaited V4 model, a system the company says can rival top-tier offerings from OpenAI, Anthropic and Google. The launch lands at a critical moment in the escalating AI race, with competition intensifying and geopolitical tensions simmering.

The Hangzhou-based firm is promising a major leap forward.

V4 introduces sharper reasoning and powerful “agentic” capabilities, allowing the AI to act autonomously on behalf of users, including writing code and executing complex tasks. The model also processes significantly larger volumes of tokens, boosting speed and efficiency in understanding instructions.

The Breakthrough That Changed Everything

DeepSeek’s rise was anything but ordinary.

Its 2025 release of the R1 model stunned the tech world, delivering near industry-leading performance at what was described as a fraction of the cost. The shockwave hit Wall Street hard, dragging down US AI stocks and raising serious questions about massive spending on data centers.

At the same time, it fueled confidence in China’s tech sector and intensified the global AI arms race.

Why V4 May Not Trigger Another Market Frenzy

This time, the reaction may be different.

“R1 shocked US markets because no one expected a Chinese model to compete at that level. V4 is simply a follow-through on that same trend, and trends don’t make headlines the way shocks do,” said Ivan Su, senior equity analyst at financial services firm MorningStar.

According to Su, investors have already adjusted.

The reality that Chinese AI models are competitive and cheaper is now priced into the market, limiting the chances of another dramatic sell-off or surge.

China’s Open Strategy vs US Control

DeepSeek is doubling down on a strategy that sets it apart from many US rivals.

Like its predecessors, V4 is open source, meaning developers worldwide can access and build on it. That approach has become a cornerstone of China’s AI push, accelerating adoption across industries from e commerce to robotics.

It is also a necessity.

Chinese AI firms face tighter budgets and restrictions on advanced semiconductor access due to US export controls.

Chip War Forces a New Playbook

To get around those barriers, DeepSeek is leaning on domestic innovation.

The company partnered with Huawei, which is supplying computing power through its “Supernode” system using clusters of Ascend 950 chips. The model also runs on hardware from Chinese chipmaker Cambricon.

That marks a shift from the R1 model, which relied on Nvidia chips.

“It allows AI systems to be built and deployed without relying solely on Nvidia, which is why V4 could ultimately have an even bigger impact than R1 — accelerating adoption domestically and contributing to faster global AI development overall,” said Wei Sun, principal analyst at Counterpoint Research.

Still Chasing the Industry Leaders

Despite its advances, DeepSeek is not claiming total dominance.

The company says V4 delivers “world class” reasoning and the strongest agentic coding performance among open-source models. Internal research shows it outperforming other open systems in general knowledge.

But it still trails behind leading proprietary models like Google’s Gemini.

Rising Power, Growing Scrutiny

DeepSeek’s meteoric rise has also drawn serious scrutiny.

Anthropic and OpenAI have accused the company of illegally extracting capabilities from their systems, a practice known as distillation.

The pressure escalated Thursday when Michael Kratsios, director of the White House Office of Science and Technology Policy, warned that foreign entities, primarily based in China, are running “industrial-scale” efforts to distill advanced AI models from US firms.

While DeepSeek was not named directly, the warning places the company squarely in the spotlight.

A High-Stakes AI Showdown

The launch of V4 underscores a new reality.

The AI race is no longer a one-sided contest.

China’s developers are not just catching up, they are reshaping the rules through cost efficiency, open access and domestic innovation.

The question now is not whether DeepSeek can compete.

It is how far and how fast it can go before the next shock hits the market.