While the US pursues cutting-edge AGI, China is competing aggressively on cost at the application layer. By making LLM tokens and energy dramatically cheaper (e.g., $1.10 vs. $10+ per million tokens), China is fostering mass adoption and rapid commercialization. This strategy aims to win the practical, economic side of the AI race, even with less powerful models.

According to Nvidia's CEO Jensen Huang, China's real threat in the AI race isn't just its technology but its centralized ability to bypass the state-by-state regulations and power constraints bogging down US companies. While the US debates 50 legislative frameworks, China rapidly deploys infrastructure, creating a significant speed advantage.

Joe Tsai reframes the US-China 'AI race' as a marathon won by adoption speed, not model size. He notes China’s focus on open source and smaller, specialized models (e.g., for mobile devices) is designed for faster proliferation and practical application. The goal is to diffuse technology throughout the economy quickly, rather than simply building the single most powerful model.

Contrary to the narrative of a simple "tech race," the assessment is that China is already ahead in physical AI and supply chain capabilities. The expert warns that this gap is not only expected to last three to five years but may widen at an accelerating rate, posing a significant long-term competitive challenge for the U.S.

A technological lead in AI research is temporary and meaningless if the technology isn't widely adopted and integrated throughout the economy and government. A competitor with slightly inferior tech but superior population-wide adoption and proficiency could ultimately gain the real-world advantage.

The US-China tech rivalry spans four arenas: creating technology, applying it, installing infrastructure, and self-sufficiency. While the U.S. excels at creating foundational tech like AI frameworks and semiconductors, China is leading in its practical application (e.g., robotics), installing digital infrastructure globally, and achieving resource independence.

The business race isn't about humans versus AI, but about your company versus competitors who integrate AI more quickly and effectively. The sustainable competitive advantage comes from shrinking the cycle time from a new AI breakthrough to its implementation within your business processes and culture.

While the US focuses on creating the most advanced AI models, China's real strength may be its proven ability to orchestrate society-wide technology adoption. Deep integration and widespread public enthusiasm for AI could ultimately provide a more durable competitive advantage.

While the West may lead in AI models, China's key strategic advantage is its ability to 'embody' AI in hardware. Decades of de-industrialization in the U.S. have left a gap, while China's manufacturing dominance allows it to integrate AI into cars, drones, and robots at a scale the West cannot currently match.