The logos of Nvidia and DeepSeek are seen in this photo illustration created Jan. 27. Reuters-Yonhap

The groundbreaking debut of Chinese startup DeepSeek's R1 chatbot last week has marked the expansion of the U.S.-China rivalry into the realm of artificial intelligence. The U.S. has long been seen as the undisputed leader in AI, while China had been playing catch-up, lagging a couple of years behind.

However, DeepSeek's so-called "Sputnik moment for AI" is now raising questions about U.S. dominance in the field. The Chinese chatbot was developed at a fraction of the cost of U.S. models, using far less data.

The Donald Trump administration has expressed concerns that DeepSeek's success might be due to stolen U.S. technology. In a recent Fox News interview, David Sacks, Trump's newly appointed AI and crypto czar, suggested that DeepSeek may have "distilled" knowledge from OpenAI's models. "I think one of the things you're going to see over the next few months is our leading AI companies taking steps to try and prevent distillation … that would definitely slow down some of these copycat models," he said.

The global competition to lead in AI isn't just a U.S.-China battle. South Korea is also vying for a top spot, with its government committing to becoming one of the world's top three AI powers, alongside the U.S. and China. Whether it likes it or not, South Korea has become a stakeholder in the U.S.-China AI rivalry and must prepare to navigate the fallout, while actively seeking opportunities.

In response to China's rapid progress, the Trump administration plans to impose restrictions on AI chip exports this spring to ensure that advanced computing power remains in the U.S. and among its allies. This move comes amid growing concerns that China is catching up to the U.S. in AI development. While few details of a recent meeting between Trump and Nvidia CEO Jensen Huang were made public, Reuters reported that the Trump administration aims to tighten restrictions on Nvidia's sales of its H20 chips to China.

The U.S.' potential strengthening of export controls could work to South Korea's advantage, as it may experience increasing demand from the U.S. to cooperate on AI-related technologies. However, to fully capitalize on this opportunity, there are hurdles to overcome. South Korea's K-Chips Act has been caught in a prolonged political crisis. The bill, which was expected to pass in the National Assembly last year, has been stalled after President Yoon Suk Yeol's short-lived martial law declared on Dec. 3. Moving the bill forward will require bipartisan cooperation.

Both the ruling People Power Party (PPP) and the main opposition Democratic Party of Korea (DPK) recognize the importance of the K-Chips Act, which is designed to provide subsidies to tech firms. However, they have yet to resolve their differences over the 52-hour workweek rule. The DPK insists that the workweek regulation be applied equally to all semiconductor industry workers, as it is to workers in other sectors. The PPP, on the other hand, argues for an exception for the semiconductor industry, where labor shortages require employees to work longer hours to meet rising global demand.

The two parties must resolve their differences on the workweek rule and cooperate to pass the bill as soon as possible. The National Assembly should prioritize the passage of the K-Chips Act during the plenary session this month.

In addition, regulatory obstacles continue to hinder South Korea's AI capabilities. A plan to build a semiconductor cluster in Yongin, Gyeonggi Province, spanning 7.28 square kilometers, is underway. The cluster is expected to house six semiconductor fabrication plants, three data centers and dozens of affiliated tech firms. Although the government unveiled the plan in 2017 and committed to full support, progress has been slow due to regulatory challenges. To ensure the cluster opens and operates as planned in 2027, the government must ease and — where necessary — lift regulations to advance the AI infrastructure initiative.

The government and tech giants must collaborate to develop and implement flexible AI strategies that enable them to adapt to the rapidly changing business environment.

DeepSeek's open-source chatbot has shaken up the market, especially amid the tightening of U.S. export controls to China. It challenges the belief that massive financial investment and advanced chips are essential components for building strong AI infrastructure. The idea of a first-mover advantage is also being questioned. Michael Horowitz, a senior fellow for technology and innovation at the Council on Foreign Relations, noted that DeepSeek's success in building on existing models suggests that the advantages of being the first to develop AI may be limited.

This underscores the idea that necessity drives innovation — a key lesson South Korea should embrace as it strives to lead in artificial intelligence.