Weekly Intelligence Brief #1

The most important developments in the Tech Cold War this week — across AI, chips, critical minerals, and defence.

AI: DeepSeek Prepares V4 as the AI Agent Era Begins

DeepSeek is expected to release its next-generation V4 model in February 2026. Early reports suggest the model is optimised for code generation and could be competitive with leading Western coding models. The Chinese company has reportedly received conditional approval to purchase Nvidia H20 chips, maintaining its access to the most powerful processors currently available in China.

Meanwhile, 2026 is being described across the industry as the year AI moves from chatbots to agents — autonomous systems capable of executing complex, multi-step tasks over extended periods without human intervention. This shift is expected to increase computing demand per user significantly, sustaining the infrastructure investment boom. Goldman Sachs projects that AI companies may invest more than $500 billion in 2026. Anthropic's revenue run rate has grown from $1 billion to $9 billion in a single year.

Why it matters: The AI race is no longer defined solely by who builds the largest model. It is increasingly about deployment, efficiency, and who captures global market share. China's open-source strategy — led by DeepSeek and Alibaba's Qwen — continues to gain traction across developing markets, while American firms dominate in proprietary models and infrastructure spending.

Chips: The H200 Saga Continues

The paradox at the heart of US semiconductor policy deepened this week. The January 2026 BIS rule allowing case-by-case exports of Nvidia H200 chips to China remains in effect, but Chinese customs authorities continue to restrict imports. Chinese firms have been instructed not to purchase the chips unless strictly necessary.

In Congress, scepticism toward the policy remains strong. The AI Overwatch Act, which would give lawmakers a 30-day veto over any semiconductor export license to China, continues to advance. The tension between those who want to maintain commercial engagement and those who favour maximum restriction shows no sign of resolution.

On the domestic front, TSMC's Arizona fabrication facility continues to ramp up, though industry observers note that matching the output and yield rates of Taiwanese facilities remains years away. The CHIPS and Science Act's $52 billion investment is producing results, but the timeline for meaningful domestic production capacity extends well into the next decade.

Why it matters: Semiconductor policy is now in permanent flux. Companies across the supply chain face regulatory uncertainty that complicates long-term planning. The emerging reality is a bifurcated chip ecosystem — American and Chinese — with declining interoperability between the two.

Critical Minerals: China Tightens, Then Pauses

China's escalating use of critical minerals as a geopolitical lever reached a new peak — and then an unexpected pause. In October 2025, Beijing announced its most stringent rare earth controls yet, requiring foreign companies to obtain licenses for products containing Chinese-sourced rare earth materials or manufactured using Chinese technologies. The scope was broadened to include five additional rare earth elements and, significantly, extended to internationally made products — not just those manufactured in China.

The impact was immediate. European rare earth prices reached up to six times Chinese domestic prices. Automakers in the US and Europe warned of production disruptions. China processes approximately 91% of global rare earths and manufactures 94% of sintered permanent magnets — the components used in electric vehicles, wind turbines, and defence systems.

Then came a tactical shift. Following diplomatic engagement, Beijing suspended both the October rare earth restrictions and US-specific dual-use licensing requirements. The pause has been framed as a confidence-building measure, but analysts caution it should not be mistaken for a policy reversal. China's broader objective — consolidating strategic control over global rare earth supply chains — remains unchanged.

In a separate development, China's 2026 export rules also brought tungsten, antimony, and silver under stricter export controls, with silver elevated from an ordinary commodity to a strategic material.

Why it matters: The rare earth pause is tactical, not structural. Companies dependent on Chinese-sourced minerals should use this window to diversify supply chains and secure licensing, while preparing for controls to potentially return in late 2026.

Defence Tech: NATO Opens Innovation to Indo-Pacific Partners

NATO's 2026 Innovation Continuum exercise series marks a significant expansion. For the first time, four Indo-Pacific nations — Australia, Japan, South Korea, and New Zealand — are eligible to compete alongside alliance members in technology acceleration events focused on AI, counter-drone systems, electronic warfare, and cyber resilience.

The initiative reflects NATO's growing recognition that the technological competition with China cannot be won within the Euro-Atlantic sphere alone. South Korea's defence partnership with NATO continues to deepen, with a new high-level consultative group established in June 2025 and arms exports to European allies — particularly Poland — exceeding $12 billion.

Japan, meanwhile, is developing its first-ever defence industry strategy, expected by end of 2026. Its defence budget reached $57 billion, and Mitsubishi Heavy Industries has been selected by Australia to build its next-generation frigate.

Why it matters: The defence tech landscape is shifting from bilateral arrangements to a networked architecture linking the Atlantic and Pacific. The pace of integration will determine whether democratic nations can maintain a collective technological edge.

Looking Ahead

Key developments to watch in the coming weeks: DeepSeek's V4 model launch and its

reception; the US first-quarter implementation of the H200 export framework; the European Commission's first CRMA progress report; and any signs of whether China's rare earth pause will hold or give way to renewed restrictions.

Tech Cold War Weekly is published every Friday. Subscribe to receive it directly in your inbox.

Sources
PIIE, "How the AI boom shrugged off the DeepSeek shock and keeps gaining steam," February 2026 (piie.com)
Capacity Media, "DeepSeek one year on," February 2026 (capacityglobal.com)
Mayer Brown, "Administration Policies on Advanced AI Chips Codified," January 2026 (mayerbrown.com)
Bureau of Industry and Security, "Revision to License Review Policy for Advanced Computing Commodities," January 2026 (federalregister.gov)
IEA, "With new export controls on critical minerals, supply concentration risks become reality," 2025 (iea.org)
CSIS, "China's New Rare Earth and Magnet Restrictions Threaten U.S. Defense Supply Chains," 2025 (csis.org)
Clark Hill, "China Hits 'Pause' on Rare-Earth Export Controls and What It Means for Supply Chains," 2025 (clarkhill.com)
CNBC, "China to restrict silver exports, echoing rare earths playbook," December 2025 (cnbc.com)
CFR, "Leapfrogging China's Critical Minerals Dominance," February 2026 (cfr.org)
DefenseScoop, "NATO invites some alliance outsiders to compete in Innovation Continuum exercises," January 2026 (defensescoop.com)
Atlantic Council, "South Korea and Europe are stepping up on security cooperation," December 2025 (atlanticcouncil.org)