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When Jensen Huang praised OpenClaw last week, the ripples reached Hong Kong within hours. Shares in MiniMax and Zhipu AI jumped more than 20% after the Nvidia CEO declared in a CNBC interview that the rapidly spreading open\u2011source agent framework was \u201cdefinitely the next ChatGPT.\u201d\u00a0<\/p>\n
Foreign investors once dismissed China\u2019s AI push as a constrained, second-tier effort. Yet now, strategists argue that the country may be better positioned for AI, thanks to cheaper power, growing capital spending, and a swarm of open-source developers. Those same analysts are also wondering whether the U.S. AI boom, after years of sky-high valuations and data center spending, is running out of steam.<\/p>\n
\u201cWe\u2019ve actually reduced our exposure to U.S. tech,\u201d Mohit Kumar, Jefferies\u2019 global macro strategist, told Fortune at the investment bank\u2019s Asia Forum in Hong Kong last week. \u201cWe believe that China is the big winner in this tech war for a number of reasons: valuation, wider adoption of AI, an advantage in power generation.\u201d<\/p>\n
\u201cChina basically has unlimited access to cheap energy, whereas the U.S. has this massive energy bottleneck,\u201d Jefferies\u2019s global head of equity research Chris Wood said to Fortune.\u00a0<\/p>\n
The country will have roughly 400 gigawatts of spare power capacity by 2030, equal to three times what the world will need to meet data center demands, according to Goldman Sachs. In contrast, the U.S. is struggling with aging infrastructure and a lack of generating capacity, leading to spiking power prices in data center states like Virginia.\u00a0<\/p>\n
In China\u2019s western provinces like Ningxia and Gansu, electricity can cost as little as five cents per kilowatt-hour, versus 25 cents in Beijing or Shanghai, or 40 cents in some parts of the U.S, according to Baidu\u2019s chief finance officer Henry He, who noted for attendees that power can make up about 35% of inference costs.<\/p>\n
China\u2019s manufacturing sector also helps its AI sector, particularly in applications that interact with the physical world. For example, He noted that Baidu\u2019s Apollo robotaxis can charge one yuan ($0.15) per mile and still be operating at break-even in the city of Wuhan. <\/p>\n
In the U.S., robotaxis manufacturers have had to choose between LiDAR sensors or visual cameras due to cost. But He argued that, in China, \u201cwe don\u2019t need to make that difficult choice,\u201d as both are affordable thanks to Chinese manufacturing.\u00a0<\/p>\n
The same logic extends to autonomous aviation. EHang, for example, relies on a domestic supply chain that can provide affordable batteries and electronic components to build its aerial vehicles. \u201cWe have an extremely competitive component cost, and we can turn it into a very competitive selling price,\u201d CFO Conor Yang explained to Fortune.\u00a0<\/p>\n
A peaking U.S. AI cycle?<\/p>\n
Wood\u2019s optimism in China is contrasted by his questions about the U.S. The Jefferies strategist thinks that investors are starting to ask questions about the amount of money being spent in the U.S. on AI infrastructure, and expects U.S. capital spending to peak this year.<\/p>\n
In an interview with Fortune, Wood described the U.S. private equity market as suffering from \u201ca giant case of financial constipation,\u201d with tens of thousands of portfolio companies waiting to IPO. In addition, private equity has recently poured money into the software sector, right as AI now threatens to erode their business models.<\/p>\n
Private credit has been tested since the bankruptcy of auto parts supplier First Brands Group last year, which spooked retail investors and pushed some asset managers, like Blue Owl, to restrict withdrawals. This year\u2019s \u201cAI scare trade\u201d has only made matters worse as retail investors try to pull their capital from fund managers, leading other fund managers, like BlackRock and Morgan Stanley, to also cap withdrawals.\u00a0<\/p>\n
Monetization is still difficult<\/p>\n
Still, China\u2019s AI companies may struggle to charge much for their products in the country\u2019s hyper-competitive environment, where labs compete on both price and performance.<\/p>\n
\u201cIt is very difficult for a single company to always [have] a top model globally,\u201d He, from Baidu, said. (Baidu, an early mover in the space with its ERNIE model, has since lost ground to Chinese rivals like Alibaba and DeepSeek)<\/p>\n
Startup MiniMax, for example, generated $79 million in revenue last year, yet reported a $1.8 billion net loss. (Investors don\u2019t seem to care, driving shares up by over six times since the startup\u2019s IPO in early January.)<\/p>\n
The problem for AI labs, whether in the U.S. or in China, is that any lead in performance could disappear in a matter of months, as other labs catch up by offering models with near-frontier-level performance, often on an open-source basis.<\/p>\n
Wood, from Jefferies, thinks that large language model providers will end up like utilities: capital-intensive, commoditized, and unlikely to earn sustainable returns. Instead, he argued that China\u2019s AI boom \u201cis going to be in applications\u2014cheap applications\u2014made possible by open\u2011source models and very cheap power.\u201d<\/p>\n
Agentic AI could be the next battleground. Chinese companies large and small are quickly rolling out their own OpenClaw frameworks, and local governments are offering subsidies to \u201cone-person companies\u201d building their own AI agent startups.\u00a0<\/p>\n
Chinese tech companies already have strong consumer platforms to put AI agents in front of users. Tencent\u2019s WeChat, for example, has over 1.3 billion monthly active users and hosts millions of mini programs spanning commerce, transport, lifestyle, and finance.\u00a0<\/p>\n
\u201cWe\u2019re going to see some interesting innovations in China. This is the only area where the U.S. and the West are going to be behind,\u201d Michael Bruck, founding partner at 71 Capital, told Fortune.\u00a0<\/p>\n
\u201cIs it a huge stretch of imagination to think the next version of a mini program is going to be an agent built into WeChat?\u201d\u00a0<\/p>\n
#China #big #winner #race<\/p>\n","protected":false},"excerpt":{"rendered":"
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