China’s tech shock threatens U.S. AI monopoly: ‘just getting started’
China is focusing on large language models in artificial intelligence.
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As China’s rapid progress in artificial intelligence threatens to challenge the US’ dominance of the market, one analyst warns that the technology shock is just beginning.
America’s “perceived monopoly” on technology and artificial intelligence has been broken by China, Rory Green, TS Lombard’s chief China economist and head of Asia research, told CNBC’s “Squawk Box Europe” on Monday.
“I think the tech shock in China is just getting started,” Green said in a conversation with CNBC’s Steve Sedgewick and Ben Boulos. “It’s not just AI, DeepSeek, and electric vehicles. China is moving up the value chain very quickly… For the first time in history, an emerging market economy is at the forefront of science and technology.” he said.
Green said China is matching dominant market-level technology with emerging market production costs, supported by its massive supply chain. He added that Xi Jinping being like a “tech bro” pouring money into these sectors creates a powerful mix that is really accelerating China’s tech story.
Indeed, Beijing quietly launched a 60.06 billion yuan ($8.69 billion) national artificial intelligence fund last year and has an initiative called “AI+” that will see the technology integrated into its economy, industries and society.
China is rapidly catching up with the US in the AI arms race; It develops highly advanced models powered by self-developed chips, especially through massive Huawei chipsets and abundant low-cost energy.
US chip giant Nvidia Huawei, seen as the gold standard for semiconductors used to train AI models, is narrowing the gap by distributing larger quantities of chips and leveraging cheaper power to scale computing.
TS Lombard’s Green explained that a “Chinese tech sphere” could easily form as the world’s second-largest economy’s low-cost technology offerings could be more attractive to emerging economies.
“China is the most important trading partner for much of the world, especially developing and frontier economies. What happens if this situation repeats itself in technology?” Green said.
He said emerging economies without national security issues with China could choose between “low-cost Chinese technology, Huawei, 5G batteries, solar panels, artificial intelligence, possibly some cheap RMB financing” or a “high-cost American and European alternative.”
“I think the choice is pretty simple for these economies, and you can easily see a world in five to 10 years where most of the world’s population will be working on the Chinese tech stack,” he added.
Additionally, Demis Hassabis, CEO of Google DeepMind, one of the world’s leading AI labs, told CNBC in January that China’s AI models may be “only a few months” behind U.S. and Western rivals and closer to those capabilities “than we thought maybe a year or two ago.”
US hyperscaler spending
Karim Moussalem, chief investment officer of Selwood Asset Management, told “Squawk Box Europe” on Monday that there is “a lot of unease about US exceptionalism,” especially after the sell-off in the US software sector earlier this month.
“When I think about the capex of hyperscalers, it’s a race that’s going on and we’re seeing a lot of money being spent, and we’re seeing more and more questions about whether you know if all of these investments, all of this capex is going to result in a meaningful return on investments,” Moussalem said.
“I think that’s actually what’s driving this big question mark between the US and China and whether the US is going to be the winner in this race. But for now, there’s a lot of capital being spent, actually much more than was expected a few months ago, and there are more and more questions about the return on investment,” he added.
— CNBC’s Steve Sedgwick and Ben Boulos contributed to this report
