China's rapid progress in artificial intelligence threatens to overturn the dominance of the United States in the global market, with analysts warning that a "technological shock" is still in its early stages. Rory Green, chief China economist and head of Asia research at TS Lombard, told CNBC’s "Squawk Box Europe" that the perceived US monopoly on technology and AI has now collapsed.
"I think the Chinese tech shock is just beginning. It’s not just about AI, DeepSeek, and electric vehicles. China is moving up the value chain very quickly. It is the first time in history that an emerging economy is at the cutting edge of science and technology," Green said in a discussion with CNBC journalists Steve Sedgewick and Ben Boulos.
According to Green, China combines dominant-market level technology with the production costs of an emerging economy, leveraging its massive supply chain. He added that with Xi Jinping acting "like a tech bro" funneling enormous capital into these sectors, a powerful mix is created that impressively accelerates the Chinese technological rise.
Indeed, Beijing discreetly launched a national AI fund last year amounting to 60.06 billion yuan ($8.69 billion), while also promoting the "AI+" initiative, aimed at integrating artificial intelligence throughout the economy, industry, and society.
The AI ‘arms race’
China is quickly closing the gap with the US in the artificial intelligence race, developing advanced models based on domestic chips—primarily through massive processor clusters from Huawei and abundant, low-cost energy.
Although Nvidia is considered the "gold standard" for AI model training chips, Huawei is narrowing the gap by increasing processor volume and utilizing cheaper electricity to scale computational power. Green emphasized that a "Chinese tech sphere" could easily take shape, as the low-cost technological solutions of the world's second-largest economy may be more attractive to developing nations.
"China is a leading trading partner for most of the planet, especially for emerging and frontier economies. What happens if this is repeated in technology?" he asked. As he noted, countries that do not face a national security issue with China have a choice between "low-cost Chinese technology—Huawei, 5G, batteries, solar panels, AI, perhaps even cheap RMB financing" or "more expensive American and European alternatives."
"For these economies, the choice is rather simple. We could easily see a world where, in five to ten years, the majority of the global population will be operating on Chinese technological infrastructure," he added. For his part, Demis Hassabis, CEO of Google DeepMind, told CNBC in January that Chinese AI models may lag behind American and Western competitors by "only a few months," and that they are closer in performance than estimated a year or two ago.
American ‘Hyperscalers’ and questions over returns
At the same time, American tech giants Amazon, Microsoft, Meta, and Alphabet recently announced capital expenditures that could reach $700 billion for AI within the year. These announcements sparked concern about the return on investment, leading to a loss of approximately $1 trillion from the market value of tech giants—though some stocks partially recovered afterward.
Karim Moussalem, head of investments at Selwood Asset Management, also told "Squawk Box Europe" that there is intense "nervousness around US exceptionalism," especially after the recent sell-off in the US software sector.
"We are seeing a race that is in full swing, with massive amounts being spent and increasingly more questions about whether all these investments will yield meaningful results," he stated. According to Moussalem, this is precisely what fuels the big question "US or China?" and which country will prevail in the technological showdown. "For now, the capital being spent is much more than expected a few months ago—but questions about ROI are multiplying," he concluded.
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