A Turning Point for Technological Supremacy and the USD

The technological supremacy of US companies seemed almost untouchable in recent years. Innovations from Silicon Valley were perceived as the engine of global progress, supported by massive investments and a leading stock market performance. But now an unexpected development is shaking up this narrative – and not from the US, but from Asia.

A Chinese technology company with just 200 employees has achieved results with its open source application ‘DeepSeek’ that are comparable to those of billion-dollar US corporations. And with significantly higher efficiency and lower costs. This development could prove to be a turning point for the global technology landscape and the status of the US dollar.

The Lesson From DeepSeek: Creativity Beats Capital

DeepSeek impressively demonstrates that technological progress is not solely dependent on the level of investment. Rather, it is the creative force that drives innovation. While US companies rely on gigantic budgets, the Chinese start-up proves that it is possible to keep up technologically with agility and inventiveness – or even set new standards.

For Europe and other regions, this means that there is no reason for resignation. On the contrary, the success of DeepSeek opens up the opportunity to achieve sustainable competitiveness through creativity and the targeted promotion of innovation.

The impact on the US stock markets and the USD

However, the success of DeepSeek raises major question marks. In particular, the valuations of the major American tech companies and the associated indices could come under pressure. The expectation that the USA will maintain its technological superiority in the long term could be permanently shaken by this ‘DeepSeek effect’.

The US dollar has already come under pressure since the beginning of the year. While it has weakened only slightly against the euro, it has shown significant weakness against Asian currencies (with the exception of the CNY). This development corresponds with the dwindling expectations of a linear technological dominance of the USA.

A Tipping Point for Capital Flows?

If the ‘deep-sea effect’ intensifies, this could further undermine confidence in the US technology sector and the US stock markets. Capital flows could increasingly shift to Asia, where new technological innovations are sought and promoted. For the US dollar, this means that the risk of a broad devaluation will continue to rise, particularly if the US fails to get its existing deficits under control.

The Role of US Policy and Possible Transition

Interestingly, the US administration itself could contribute to the devaluation of the dollar. A weaker currency would increase the US’s room for manoeuvre to reduce its deficits. Treasury Secretary Bessent, in coordination with the Federal Reserve, could pursue a strategy of lowering interest rates and stabilising government finances at the same time. This would make it easier to service debt in the short term, but would further undermine the status of the USD as the dominant currency in the long term.

Conclusion: A Decisive Phase for the USD and the Global Economy

While the USD is currently still being supported by short-term power plays by the US administration, the foundations for lasting strength are fading. An end to the war in Ukraine could further accelerate this process.

The question is no longer whether the USD can defend its supremacy in the long term, but how quickly and sustainably new players will emerge on the global stage. DeepSeek could symbolise a new technological competition – a competition that is no longer decided by capital alone, but by creativity.

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