880: Manus, DeepSeek and China’s AI Boom
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This is episode number 880 on Manus and the Chinese AI boom. Welcome back to the Super Data Science Podcast. I am your host, Jon Krohn. Today we're diving into the fascinating AI boom that's been sweeping across China since early 2025, examining what this means for the global AI landscape and markets in general.

Just hours after the launch on March 6th of Manus, a Chinese AI agent, its registration site crashed from the sheer volume of visitors. Butterfly Effect, the company behind Manus, boldly claims its technology outperforms OpenAI's models, though they're now forced to grant previews by invitation only as they struggle to handle so much traffic. There are even reports of registration codes being sold on the black market.

Manus is merely the latest manifestation of the AI mania that has swept over China since January, when DeepSeek, which I covered back in episode number 860, shook the global AI community with a model that delivered comparable performance to Western counterparts at a fraction of the cost.

The effect on Chinese markets has been nothing short of staggering since then. Chinese stocks are experiencing their best start to a year on record, outpacing American ones by a considerable margin. The Hang Seng Tech Index, which tracks the biggest Chinese tech companies listed in Hong Kong, has surged by more than 40% since mid-January alone.

The excitement stems from a belief that more affordable AI will help innovators develop novel applications for the technology. Cloud computing providers are ramping up investment in data centers, triggering a cascade of capital spending throughout the supply chain. But the big question remains, will this boom have staying power?

In recent weeks, we've seen hundreds of large Chinese enterprises spanning sectors from automotive manufacturing and state-owned energy companies to banks and food and beverage distributors. They've all announced plans to integrate DeepSeek's technology. Even tech giants like Tencent are embedding DeepSeek models into their products despite having developed models of their own.

This widespread adoption extends to the public sector too, with city governments integrating DeepSeek's models into mobile applications for basic citizen services, while government departments, hospitals, and universities across China are exploring how to employ it for what they call party-building activities. And they're not talking about a fun night out. They're talking about the Communist Party.

The hype has reached such a fever pitch that local equity analysts joke that they must find a DeepSeek angle if they want their research reports to gain any traction. Some investors have gone so far as to speculate that DeepSeek could single-handedly revive the property market in Hangzhou, where the company DeepSeek is headquartered.

Chinese venture capitalists are equally enthusiastic. One Beijing-based VC noted that integrating DeepSeek's tech into her portfolio of robotics companies has led to significant cost reductions and performance improvements. Amid this excitement, countless AI startups have emerged across China. Some venture investors are pouring money into these startups, even while acknowledging that they're likely witnessing a bubble forming.

As one Hangzhou-based investor put it, it's overwhelming, but we have no choice. The economy is not good and there are not many opportunities elsewhere. So we have to go into AI as fast as possible. The strategy, according to this investor, is to invest in what Chinese investors call an A round, the earliest financing series, and then exit during an A plus round, which might come just a few months later. Sounds like flipping homes to me.

But the Chinese government is also leaning into this trend. On March 6th, China's central government announced plans to establish a venture capital fund with a staggering trillion yuan, so that's about 140 billion US dollars, earmarked for tech-focused investments.

China's tech giants, including Alibaba, Baidu, Huawei, and Tencent, are embracing the hype and hoping to capitalize on the boom, particularly through their cloud computing divisions. Last month, Alibaba made the ambitious proclamation that its main objective was to achieve human-like artificial general intelligence. Well, ambitious, yes.

but they're joining a long list of firms that are aspiring to do so. And yeah, anyway, on March 6th, Alibaba released a new reasoning model that it claims matches DeepSeek's capabilities. So yeah, small companies as well as the big tech giants in China are

All racing in this AI boom. Alibaba itself has committed around $53 billion over the next three years to build data centers to meet the surging demand for AI cloud services, more than the company spent over the past decade. So more expected to be spent on cloud infrastructure in the coming three years relative to the past 10.

As already the market leader in China's cloud sector with a 36% share, Alibaba appears to be betting that this growth in this area will offset the sluggishness in its core e-commerce business. Baidu, another tech giant, has already experienced a substantial increase in its cloud revenue, helping to counterbalance declines in other divisions that Baidu has. In terms of hardware, that side of this boom is always critical. The frontier of AI is driven by

by having lots of the latest hardware. And so demand for servers optimized for AI has skyrocketed in China since early February, roughly coinciding with DeepSeek's rise to prominence. Suppliers have begun offering all-in-one servers that come pre-equipped with AI software.

Many of these are sold directly to companies, including state-owned enterprises that prefer on-premises servers for enhanced security. As an example, Sang4 Technologies, founded by former Huawei employees, has been one of the biggest beneficiaries of this trend, with its share price surging by about 140% so far in 2025. China's AI boom is driving capital investment throughout the country's hardware supply chain. According to analysts at Jefferies, an American bank,

Server manufacturers may spend more than 1.4 trillion yuan, which is like 200 billion US dollars, over the next two years as they expand production capacity. However, it isn't all roses. Some analysts are beginning to urge caution. So someone named Kai Wang of Morningstar, a really well-reputed ratings agency based in the US, argues that DeepSeek won't fundamentally change most of the companies that have benefited from the recent stock market rally in China. Hmm.

Another recent rally faded when anticipated strong government support for the economy failed to materialize. The same could happen this year if companies struggle to monetize AI effectively. Access to advanced semiconductors could be another challenge. For now, the supply appears to be sufficient. Companies can still purchase H2O chips from Nvidia, though these are less powerful than Nvidia's top-tier chips that America has barred China from buying. Though

Local chip designers like Cambercon and Flame and Huawei are working to try to close this gap and have begun supplying some Chinese AI firms, but they're not quite at Nvidia's level yet. So semiconductor limitations could still cause China's AI frenzy to lose momentum.

Some analysts worry that as new applications emerge, driving demand for ever more computing power, constraints on chip supply will become increasingly problematic. China's leading foundry, the state-owned SMIC, faces serious capacity constraints and can't produce the most advanced semiconductors. Even Huawei's best locally designed chips still lag significantly behind NVIDIA's

in performance. The geopolitical dimension adds another layer of uncertainty. The Trump administration in the US is reportedly considering even harsher restrictions on China, including limiting access to the H2O chips that Nvidia can currently provide them. China's market rally is predicated on the belief that the cost of training and running AI models will continue to decline.

By restricting access to chips, America could potentially drive those costs back up, bringing China's AI euphoria to an abrupt end. We'll see what happens.

As with many technological trends, we're seeing both genuine innovation and speculative excess in China's AI sector. The long-term implications for global AI development, market dynamics, and geopolitical relationships remain to be seen. These are indeed fast-moving times, and we'll continue to monitor these developments, although this is one of the first episodes I've ever done exclusively on AI.

on geopolitical impacts of ai if that's something you're into hearing about all the time i highly recommend the news podcast last week in ai i've got a link the last week ai in the show notes it's a show that i've co-hosted half a dozen times or so i absolutely love uh the hosts of that show andre and jeremy and they've haven't paid me to plug them i am just doing that uh

because I think it's such a great show. It's the only podcast I listen to. So yeah. And then in terms of the implications for us as hands-on practitioners, as many of us listeners are or as I am, there are some great things coming out of this, this AI boom in China for everyone in the world. For example, the trend towards open sourcing data processes, model weights that DeepSeek has

has been taking a lead on. And so hopefully we'll see more of that all over the world. And you as a data scientist or developer can take advantage of all that open sourcing

And yeah, so there you go. The positives, no matter what happens. All right. That's it for today's episode. If you enjoyed it or know someone who might consider sharing this episode with them, leave a review of the show on your favorite podcasting platform. Tag me in a LinkedIn or Twitter post with your thoughts. And if you aren't already, be sure to subscribe to the show. Most importantly, however, we hope you'll just keep on listening. Until next time, keep on rocking it out there. And I'm looking forward to enjoying another round of the Super Data Science Podcast with you very soon.