High Stakes for Nations in the Great AI Race

Dear friends,

There is now a path for China to surpass the U.S. in AI. Even though the U.S. is still ahead, China has tremendous momentum with its vibrant open-weights model ecosystem and aggressive moves in semiconductor design and manufacturing. In the startup world, we know momentum matters: Even if a company is small today, a high rate of growth compounded for a few years quickly becomes an unstoppable force. This is why a small, scrappy team with high growth can threaten even behemoths. While both the U.S. and China are behemoths, China’s hypercompetitive business landscape and rapid diffusion of knowledge give it tremendous momentum. The White House’s AI Action Plan released last week, which explicitly champions open source (among other things), is a very positive step for the U.S., but by itself it won’t be sufficient to sustain the U.S. lead.

Now, AI isn’t a single, monolithic technology, and different countries are ahead in different areas. For example, even before Generative AI, the U.S. had long been ahead in scaled cloud AI implementations, while China has long been ahead in surveillance technology. These translate to different advantages in economic growth as well as both soft and hard power. Even though nontechnical pundits talk about “the race to AGI” as if AGI were a discrete technology to be invented, the reality is that AI technology will progress continuously, and there is no single finish line. If a company or nation declares that it has achieved AGI, I expect that declaration to be less a technology milestone than a marketing milestone. A slight speed advantage in the Olympic 100m dash translates to a dramatic difference between winning a gold medal versus a silver medal. An advantage in AI prowess translates into a proportionate advantage in economic growth and national power; while the impact won’t be a binary one of either winning or losing everything, these advantages nonetheless matter.

Looking at Artificial Analysis and LMArena leaderboards, the top proprietary models were developed in the U.S., but the top open models come from China. Google’s Gemini 2.5 Pro, OpenAI’s o4, Anthropic’s Claude 4 Opus, and Grok 4 are all strong models. But open alternatives from China such as DeepSeek R1-0528, Kimi K2 (designed for agentic reasoning), Qwen3 variations (including Qwen3-Coder, which is strong at coding) and Zhipu’s GLM 4.5 (whose post-training software was released as open source) are close behind, and many are ahead of Google’s Gemma 3 and Meta’s Llama 4 — the U.S.’ best open-weights offerings.

Because many U.S. companies have taken a secretive approach to developing foundation models — a reasonable business strategy — the leading companies spend huge numbers of dollars to recruit key team members from each other who might know the “secret sauce“ that enabled a competitor to develop certain capabilities. So knowledge does circulate, but at high cost and slowly. In contrast, in China’s open AI ecosystem, many advanced foundation model companies undercut each other on pricing, make bold PR announcements, and poach each others’ employees and customers. This Darwinian life-or-death struggle will lead to the demise of many of the existing players, but the intense competition breeds strong companies.

In semiconductors, too, China is making progress. Huawei’s CloudMatrix 384 aims to compete with Nvidia’s GB200 high-performance computing system. While China has struggled to develop GPUs with a similar capability as Nvidia’s top-of-the-line B200, Huawei is trying to build a competitive system by combining a larger number (384 instead of 72) of lower-capability chips. China’s automotive sector once struggled to compete with U.S. and European internal combustion engine vehicles, but leapfrogged ahead by betting on electric vehicles. It remains to be seen how effective Huawei’s alternative architectures prove to be, but the U.S. export restrictions have given Huawei and other Chinese businesses a strong incentive to invest heavily in developing their own technology. Further, if China were to develop its domestic semiconductor manufacturing capabilities while the U.S. remained reliant on TSMC in Taiwan, then the U.S.’ AI roadmap would be much more vulnerable to a disruption of the Taiwan supply chain (perhaps due to a blockade or, worse, a hot war).

With the rise of electricity, the internet, and other general-purpose technologies, there was room for many nations to benefit, and the benefit to one nation hasn’t come at the expense of another. I know of businesses that, many months back, planned for a future in which China dominates open models (indeed, we are there at this moment, although the future depends on our actions). Given the transformative impact of AI, I hope all nations — especially democracies with a strong respect for human rights and the rule of law — will clear roadblocks from AI progress and invest in open science and technology to increase the odds that this technology will support democracy and benefit the greatest possible number of people.

Keep building!

Andrew