China’s AI Ascendancy: A U.S. Monopoly Under Threat

## China’s AI Ascent: A Tech Shockwave Challenging US Dominance

The landscape of artificial intelligence is undergoing a seismic shift, with China rapidly emerging as a formidable challenger to the United States’ long-held technological supremacy. Analysts are sounding the alarm, warning that a “China tech shock” is in its nascent stages and poised to redefine the global AI arena.

Rory Green, Chief China Economist and Head of Asia Research at TS Lombard, articulated this sentiment, suggesting that America’s “perceived monopoly” in technology and AI has been effectively dismantled by China’s aggressive advancements. “I think the China tech shock is just getting started,” Green stated. “It’s not just AI, DeepSeek, and electric vehicles. China is moving up the value chain very rapidly. It’s the first time in history that an emerging market economy is at the forefront of science and technology.”

This ascent is fueled by a potent combination of cutting-edge technology, the cost efficiencies of an emerging market, and an unparalleled supply chain. Green highlighted the strategic impetus behind this push, noting that under President Xi Jinping, substantial capital is being channeled into these critical sectors, accelerating China’s technological narrative at an unprecedented pace.

Beijing’s commitment is underscored by tangible investments, including the quiet launch of a significant national AI fund last year, reportedly worth 60.06 billion yuan (approximately $8.69 billion). Furthermore, the “AI+” initiative aims to embed artificial intelligence across the entirety of China’s economy, industries, and societal fabric.

In the critical domain of AI development, China is rapidly closing the gap with the US. The nation is not only producing highly advanced AI models but is also bolstering its capabilities with domestically produced chips. This is particularly evident through massive chip clusters developed by Huawei, coupled with access to abundant and cost-effective energy sources.

While US chip giant Nvidia remains the benchmark for AI model training, Huawei is aggressively narrowing the disparity by deploying chips in greater volumes and leveraging cheaper power to scale its computational power. This strategy could pave the way for a distinct “China tech sphere,” where its cost-effective technological offerings become increasingly attractive to developing economies worldwide.

“China is a top trade partner for most of the world, particularly in emerging and frontier economies. What happens if that repeats on tech?” Green mused. For developing nations without security concerns regarding China, the choice becomes stark: opt for “low-cost China tech, Huawei, 5G batteries, solar panels, AI, probably some cheap RMB financing,” or embrace the “high-cost American and European alternative.” Green predicts that “the choice is fairly simple” for these economies, potentially leading to a scenario where “most of the world’s population is running on a Chinese tech stack in five to 10 years time.”

This assessment aligns with insights from Demis Hassabis, CEO of Google DeepMind, one of the world’s foremost AI research labs. Hassabis previously indicated to CNBC that China’s AI models might be mere “months” behind their US and Western counterparts, a closer proximity than previously anticipated.

**US Hyperscaler Spending Under Scrutiny**

Meanwhile, the immense capital expenditure by US hyperscalers like Amazon, Microsoft, Meta, and Alphabet, which recently announced up to $700 billion for AI this year, has triggered concerns regarding return on investment. This spending spree has already led to significant market fluctuations, with trillion-dollar valuations being wiped from tech giants, though some have since recovered some ground.

Karim Moussalem, Chief Investment Officer at Selwood Asset Management, noted the prevalent “nervousness around U.S. exceptionalism,” especially following a recent sell-off in the US software sector. “When I think of the hyperscalers’ capex, we’re seeing a race that’s on and a lot of money being spent, and more and more question marks around whether all that investment, all that capex, is going to result in meaningful return on investments,” Moussalem explained. This uncertainty, he added, is fueling the debate over US versus China’s leadership in the AI race, with substantial capital being deployed against a backdrop of growing questions about ROI.