China closes the AI gap, but U.S. compute and capital keep it ahead for now

The CEO of AI startup Hugging Face, Clément Delangue, recently claimed that China is winning the AI race, saying the country is "clearly dominating on open models right now" and could start leading at the frontier by the end of this year or next.

Chinese models are increasingly closing the performance gap with U.S. frontier systems, despite restrictions on access to advanced computing chips. Beijing-based Moonshot's Kimi K3, released in July, came close to top models from Anthropic and OpenAI in benchmarks, even surpassing them in some areas. Western companies are adopting Chinese AI models more as their capabilities improve.

The world's most capable open models are all Chinese, and experts consider China ahead in robotics. Chinese models are also cheaper, making them attractive for many uses that don't require frontier-level performance. Daniel Remler, a senior fellow at the Center for a New American Security, told CNBC that based on current trends, Chinese AI is likely to become the default for developing countries, which could push those nations to align politically with Beijing.

However, the U.S. still holds major advantages. The U.S. has the most capable models, strong tech alliances, and an overwhelming edge in compute power. Export controls have limited Chinese firms' access to advanced chips, hurting their ability to train larger models and serve inference. Moonshot had to pause new subscriptions after demand for Kimi K3 overwhelmed its capacity.

China is working around these limits, with companies accused of accessing compute overseas, distilling U.S. models, and smuggling Nvidia chips. Its domestic chip industry is also improving, though still far behind America's. The U.S. benefits from a strong private capital ecosystem that lets firms like Anthropic and OpenAI raise record funding, and talent still flows to the country.

Dewardric McNeal, managing director at Longview Global, wrote that the key question is whether the U.S. can adapt quickly enough to compete with China's advances in cost, deployment, customization, financing, standards, developer adoption, and global reach. The race remains far from settled.

Source: CNBC