China’s AI Proliferation—Real Threat or Hype?

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One analyst told CNBC’s “Squawk Box Europe” earlier this week that within five to 10 years, most of the world’s population could be running on a Chinese technology stack.

Rory Green, chief China economist at TS Lombard, said China has broken the United States’ “supposed monopoly” in technology and AI, adding that the country’s rapid development threatens to undermine America’s dominance in the market.

Mr. Green’s comments come as China races with the United States to develop artificial general intelligence (AGI), where AI rivals human performance, and roll out that technology throughout society. There is a big move to expand domestic AI chip manufacturers to rival Nvidia, and local AI companies are making waves on the stock exchange.

But can China really win the AI ​​race?

2025 was the year that much of the Western world started paying serious attention to China’s frontier AI companies, with DeepSeek sparking a market frenzy, and local tech giants have since released a number of their own models.

Many model manufacturers in China use OpenAI, Anthropic, googlePaul Triolo, a partner at advisory firm DGA-Albright Stonebridge Group, told CNBC.

Computing is the big issue. Export controls to limit advanced access Nvidia Nick Payens, head of AI at research firm Futurum Group, told CNBC that GPUs create “a real ceiling on the compute side of scaling.”

These shortcomings are well known to all Chinese AI companies.

DeepSeek acknowledged in a December research paper that it faces “certain limitations when compared to frontier closed-source models” such as Gemini 3, including computing resources. technology leader alibaba’s According to a report in the South China Morning Post, the Qwen team said at a conference in Beijing in January that there is less than a 20% chance that Chinese companies will surpass US tech giants in the AI ​​field within the next three to five years.

However, AI companies in this country have several advantages over their American counterparts.

The most obvious area where China is competing with the United States is in efficiency-oriented model development, achieving strong performance at lower computational costs, Patience said.

“Whether by necessity (chip constraints) or strategy, Chinese labs are making significant advances in inference efficiency and quantization technology, and this should be taken seriously by the entire industry,” he said.

It has power too. China is experiencing an energy boom, adding more power capacity in the past four years than the United States combined, Bloomberg reported last month.

“This will help the spread of AI in China, as more energy will be available to operate data centers and other AI-related infrastructure,” Triolo said.

By releasing competitive open source or open weight models, Chinese labs are “eroding the commercial moat that U.S. closed model vendors have relied on,” Patience said.

“If companies can deploy a capable, open-weight Chinese model on their infrastructure at a lower cost, the business case for paying a premium to U.S. providers is significantly weakened,” he told CNBC.

As Julian Sun, vice president at research firm Gartner, told CNBC, the AI ​​race is moving “from model performance to value realization,” which could be a big boon for Chinese AI companies.

Mr. Greene’s projection of the Chinese technology stack is a “plausible long-term scenario” for parts of the Global South, where cost is a key consideration and geopolitical ties with the United States are weak, Mr. Patience said, but he cautioned that it was a “5- to 10-year speculative judgment.”

The United States still has some major advantages.

American companies continue to lead in areas such as advanced semiconductors, frontier model research, and hyperscalar infrastructure. They also continue to solicit huge amounts of money from investors and companies, and governments are deploying their tools around the world.

Sun said he sees the global AI landscape becoming “multipolar” across different layers of the technology stack, rather than being dominated by a single ecosystem. Only time will tell how this will play out geographically as AI systems become ubiquitous in society.

Mistral AI’s CEO told CNBC on Wednesday that more than 50% of a company’s current software could be replaced by AI.

meta It announced a major chip deal with Nvidia that will see the tech giant introduce its next-generation Vera Rubin system.

Europe is scrambling to overturn US dominance of digital services in infrastructure amid global geopolitical tensions, officials told CNBC.

Rapid advances in quantum computing are fueling investment in the field and fueling discussions about how these powerful computers will integrate with industries such as the already booming data center sector.

Prosecutors announced Thursday that a federal grand jury has indicted three Silicon Valley engineers on charges of stealing trade secrets from Google and other technology companies and transferring sensitive data to Iran.

Quote: microsoft President Brad Smith told CNBC that U.S. tech companies should be “a little concerned” about the subsidies their Chinese competitors are getting from the government in the AI ​​race.

The big picture: As competition intensifies between U.S. and Chinese model manufacturers, the Chinese government is supporting its AI companies with measures such as a multibillion-dollar state investment fund and cheap energy vouchers for computing.