- Companies can still make money from commodities

- Chinese labs only have 5-10% the valuation of OpenAI/Anthropic, so massive monopoly profits aren't necessary. Profit expectations for tech companies in China are really low in general, complete opposite of the US.

- Open weighting is a great way to get talent/attention/reputation

The AI CTO from The Linux Foundation, Matt White, spoke about his recent trip to talk to the Chinese Ai labs ~month ago.

https://www.youtube.com/watch?v=zHi0jy4MK4c

https://www.economist.com/china/2026/07/16/china-wants-to-en...

Especially Chinese companies. Just think about all the other industries where Chinese companies dominate by extremely low cost.

The Chinese edge tends to come from their environmental laws; they allow their industry to do things that the West would ban.

[0] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...

What’s not overblown is the ease with which the government can get big projects done. And there are some downsides to that, specifically when it comes to property rights.

The Beijing public transit trains are a great example. The routes are wildly straight. So straight they allow extremely long trains.

Thats possible, in part, because the government can just reappropriate the land in a way that governments in the west can’t without engaging with a contentious public.

And that’s just one example. That sort of thing permeates many different kinds of projects and leads to a particular kind of efficiency.

> They're pumping out solar like mad and places like the Xinjiang deserts actually have nowhere to put their excess electricity from what I've read previously.

You've found a pretty compelling piece of evidence right there. There is a reason they're the ones pumping out solar like mad - because they have relatively lax environmental laws. If they had western-style environmental laws the panels would have to be manufactured in India or Africa or something.

Obviously it isn't the only criteria because I'm sure there are places with lower environmental requirements than China; but the big selling point for the last 20-odd years seems to have been more that you're allowed to manufacture there and they have a competent workforce rather than that the wages were amazingly low.

Confucius came before Plato and most important discoveries came from China. The two wrote a the "good citizen" ought to be and how a city/country/empire ought to be run. Even meritocracy has been traditionally stronger in China, over centuries.

In the west we're talking about it since Homer, but in practice has been applied sporadically, while China has been much more consistent.

However large parts of many countries is rural, and different amounts for different countries, and that tends cause control issues.

But in general, a low Geni coefficient and a high GDP per capita means labour costs are high.

So, plonking data centers into the desert (or on orbit) isn't really a silver bullet, is it?

I don't know if they're actually building AI DCs out there, but it doesn't seem completely unreasonable like you're suggesting.

Of course it doesn't seem completely unreasonable to build out power distribution, cooling, and high-bandwidth network interconnects throughout a region, but once you've done that, you are no longer facing the empty, barren desert scenario.

So if China builds out infrastructure that can be maintained in perpetuity, then more power to them, and the NIMBYs won't have a leg to stand on.

Conversely, in these United States, I've seen literal tons of data centers being plonked into urban centers: literally at intersections where lots of people drive by in daily commutes, there are data centers now where there weren't before, and they are also found on the outskirts of civilization, because they require more security than accessibility. So data center siting can take multiple factors into account here, depending on their purpose.

And can we please stop hammering on the "AI Data Center" meme, because in my experience, a DC is a DC, whether they choose to make it AI or not AI, they're probably all AI from now on, but it just adds fuel to the Luddite fires to say so...

I don't see why the same couldn't happen if they let datacentres drive up energy costs or have other widespread impacts.

I'm sure it's better than it was before and it's not India bad but it's almost always considered unhealthy in most parts throughout the whole year

Good luck for getting that type of life in silicon valley.

Though in manufacturing China is dominating because of immense optimized supply chain, economy of scale and now workforce with know-how.

I honestly cant compare with US since I'm not from US, but to produce something in EU you will have weeks or months lags on logistics of source materials and components. And some industries only exist in some countries, etc.

In China in one single place you have anything you need to produce from a toaster to a car in hands reach or might be few days at most.

And I guess China did the same with education. Education is a lot cheaper there so they just have more talent.

I'm definitely not saying that's the only factor, but I think it's naive to assume it isn't at all a factor.

In the same way that the US going to war with an important Chinese oil supplier: 85% of Iranian oil going to China and comprising ~14% of China's oil imports.

There's always geopolitical reason behind the reason.

Even if the current President was known for his strategic global thinking and ability to keep quiet about the “real goals,” other explanations seem more likely.

It is hurting China. Their economy has slowed to a crawl as a result of stalled oil and has delayed any real gains they had by at least a couple of years.

https://www.nytimes.com/2026/07/15/business/china-economy-gd...

Do you think Trump makes all of these decisions? Like all presidents, he has many advisors around him.

China’s factory outputs are in fact increasing. So is their export. You wouldn’t see this if they are energy constrained. China’s problems are weak consumption and deflation. It started way before this year and has very little to do with Iran.

Anybody who's ever looked at a map can see that Iran surrounds a strategic chokepoint for the world's most important natural resource.

It is almost like there is a book called AI Superpowers from 2018 that Kai-Fu Lee tells you exactly how all this is going to go.

Why would I read a book though when I can just repeat the nonsense from my social media feed?

For example, part of the dynamic was, according to the NYT (though they may have been fed bad intel), that Ahmadinejad was apparently working with Mossad and could've been a partner for a new leadership team in Iran. Who saw that coming?

It also brings to mind Kennedy. He campaigned hard on, in part, the "missile gap" with the USSR. Gets into office, gets read into the real intel, realizes the "missile gap" was essentially a MIC psyop of strategic 'leaks' to the media and that the US was in fact far ahead of the USSR in strategic arms. Kennedy was furious -- but due to it all being classified, could say nothing in public. But it did start a pattern of mistrust that lasted his presidency between him and the MIC. That all didn't come to light later.

Later, like the Ukraine/Starlink thing. The media jumped all over Elon for allegedly holding back Ukraine and shutting off their terminals close to the front lines. More recently it turns out that was the US government, they were afraid Ukraines rapid progress might tempt Russia to deploy tactical nukes. Elon was innocent.

Theres layers upon layers of things we don't see and won't know for decades after the fact. And as Hillary showed with her email server, digital records are more ephemeral these days, so there will be a lot of things we simply never know.

Ironically, part of the story behind the email server was that State Dept IT was so bad that provisioning a new email server was a months-long request.

So naturally, shadow IT became prevalent.

That said, if were going down the rabbit hole of saying that the Chinese labs are now part of a larger geo political strategy by the Chinese government, then I think Taiwan is part of the equation. If the frontier models require the best chips and those are mainly coming out of Taiwan then it's hard to imagine a world where the US allows China to make a move on Taiwan without a fight. If frontier level models can be run on chips being made elsewhere, then Taiwan becomes less important geopolitically. I don't think we'll ever get to a world where the US is just like, "Fine China. You do what you want.", but China has to assume that there will be a lot less resistance from the US is Taiwan isn't such a key component in the AI race.

Another reason could be that they want to close the gap between their valuations and OpenAI/Anthropic.

Either Chinese labs are worth more or OpenAI/Anthropic are worth less. One of those is true

The reason that's not inherently accurate is because it assumes the economic models are identical. That couldn't be further from the truth. It'd be like pretending a globally dominate Google search engine should be worth as much as eg Baidu or Yandex. No doubt Baidu is an advanced search engine, and that's not what defines its economic characteristics: the markets it operates in does, the market ownership does, the ad engine does, the ability to sell does (advertiser relationships), etc.

OpenAI is very likely to bolt on a massive, global advertising platform to GPT over the coming years (and yes, it'll take time to build up). The Chinese labs will have a very hard time replicating that to a global audience the way the US tech companies have repeatedly proven they can. OpenAI will poach proven ad system builders from Meta and Google.

https://www.reuters.com/world/asia-pacific/chinas-xi-promote...

Another buzzword mentioned by Xi is "safety and controllability" (安全可控), which is generally in tension with open source, since that involves giving up control. Historically, when there's a conflict between openness and controllability, the Chinese government tends to choose control, see the Great Firewall.

The aspect that you can count on is that China sees AI as a long term strategic necessity, so they will support domestic players for an extremely long time. But unless you're a Chinese lab that shouldn't necessarily be a comfort to anyone else.

I expect the Chinese will do something wildly stupid at some point, but they've been behaving quite responsibly so far.

It’s really amazing to see that the competition is creating better quality models for everyone - and am really happy that some of these are open source (or partially os).

Regarding the valuation, that maybe points a finger to the over valuation of the US companies ?

Interesting times to be alive.

That doesn’t mean the trust is unearned once gained, or a bait and switch, or purely Machiavellian either btw.

Consumers and businesses need credible branding to feel like they can trust vendors who provide them with the products they value or deem mission-critical, because it creates accountability and makes it less risky to depend on.

Open source addresses the credibility/accountability/branding/counterparty problems simultaneously, and adds to a permanent intellectual commons we all benefit from. It’s legitimately just Good

This would be like saying that the creation of the PC undermined the 1980s economy because it hurt IBM's profits. Instead the consequences of cheap, ubiquitous personal computers grew the economy 10-fold.

There is an entire class of wholesale model providers that stand to gain from open source models. Then there are companies building platforms on top of LLMs that would otherwise be impossible with closed models due to cost. And there are entire enterprise use cases that would simply be non-viable at $50/million tokens, like OpenClaw, Hermes, etc.

This is a talking point that plays into the frontier labs' desire to be seen as "too big to fail". While yes, several hundred billion dollars have been invested in AI, (a) much of this is in the form of circular Monopoly-money deals, and (b) the US GDP is over $30 trillion annually. The real economy - the one that makes food, builds homes, provides medical care, etc. - is so much bigger and more important than the AI industry.

That's not to say that an (inevitable?) AI crash won't be the spark that ignites a big recession. We are well overdue for one.

The real economy has seen pretty poor growth under Trump tariffs chaos though and I'm not sure the US economy could survive a crash of the tech companies

I think it is very likely that Google open sourced Android to undercut iPhone. Android was initially developed for phones with a keyboard (similar to Blackberry). The introduction of the iPhone made it clear that touch was going to be the future, so Android was quite far behind before it was even released. Besides that, my recollection is that the first Android releases were pretty bad compared to iPhone OS. I know a lot of people (not necessarily Apple fans) who looked down on Android.

Open sourcing Android was a great move to rally manufacturers around Android and gather a large group of early enthusiasts.

The main impact iPhone had on Android was delaying it to redo the UI to make it nicer. Not trivial changes but not fundamental business strategy changes either.

First Android releases weren't bad at all. I'd say the UI was more 'classic' feeling and not as nicely animated than the first iPhone, but the first Android actually had far more features. And some critical ones too, like you could actually write apps for it.

Maybe in your test labs, but on real HW it was sluggish, laggy and barely usable. Source: I owned the original Samsung Galaxy and tried some friend's HTC Magic and they were horrible. The first real good Android phone, perf wise, was IME the Galaxy S II.

Thank you for correcting me! Very interesting to hear.

It was codenamed "Astro Boy". Btw, the team Andy Rubin assembled to build "android" first built OS for Digital Cameras viz. FotoFrame.

Android the technology wasn't, but Android the commercial product along with its business model was.

The first iPhone came out in June 2007. In November of that year Google and partners announced the Open Handset Alliance and the open sourcing of Android.

Android was created to compete with Blackberry, Google then acquired Android.

In a world, that's increasingly dependant on the AI "opium" that the US is dealing, it's conceivable that the current administration could try to sabotage something like, say Chinese-European relationships, by threatening to cut access to Anthropic or OpenAI products for Europeans, if China cosies up to the EU.

The disadvantage of trying to use these leverages, is that once the genie's out of the bottle, the other party will divert their focus quickly, so it only works if the US truly has a choke-hold on frontier AI. Otherwise, you just scared the other party into never trusting American frontier AI ever, and you didn't even truly hurt them, because they already have a quick fix from China.

Unfortunately behind a paywall, but there's an article in the previous issue of Foreign Affairs about how the Trump administration has fumbled this coercion strategy repeatedly because they overestimated their advantage in different markets (tariffs on Canada, Iran, etc) and what an actually effective strategy can look like https://www.foreignaffairs.com/united-states/how-fight-econo...

tl; dr: You need to have a monopoly, the enemy should not bounce back quickly, you shouldn't cripple your own economy doing it.

AI may just be the next economic offensive the Trump administration fumbles, because China planned ahead by incentivising development of close-second alternatives to their frontier models.

there are dozens of us!

> 100s of Millions

That is utter peanuts given the stakes. This is competition between two super powers for the most important technology in human history.

You ever seen a swan drown something before? It ain't quick

All the ones I'm familiar with are veggies, with webbed feet and squawk a lot.

The children's book "if you give a mouse a cookie" was about exactly this phenomenon

Not to get all philosophical but this makes no sense outside of the context of a very specific post-Protestant, engagement/outrage-driven social media context.

If people are “only being good because it’s in their best interest” the last thing you should be doing is arguing against valuing good things, or making it impossibly difficult for someone capable of doing good to be trusted. Also literally the basis for Western (Plato, good as attractor state, res publica) and Eastern (kongzi, filial piety, social harmony) civilization btw.

It’s also not a binary thing. You could truly start off with the noblest intentions but succumb to lesser-evil thinking or unforeseen political/personal complexities, lose influence or control to those with less pure intentions, be bought or become a political pawn in a more extractive endeavor without realizing it, etc.

Reasonable adults generally understand that “free stuff” costs real time and money to provide, and that businesses can only sustain it when it helps them sell their products. Unfortunately that means “free” appeals most to people with lots of time, no money, or lacking in the reasoning/adulthood departments.

In modern terms, it's enabling others' pathological dependency on your free stuff.

The same way a normal parent would teach their child to become self sufficient instead of providing for them for their first 30 years of life and then tell them to figure out how to live after being used to not working.

I mean, it's pretty sad but there are examples of these things happening, and I definitely wouldn't say the parent is blameless for allowing this to happen.

I could also argue with GP's comment that some US companies are driving towards commoditization as well. One released a model this week and another announced their series d today.

Photonic computing?

So far it rates "quite important" and certainly not "paradigm shift".

I've just spent most of the day wading through vibed blogs and what not to glean info on ... setting up LLMs! The content on the web is already in a parlous state and rapidly getting nicely but rather the same presentation and mostly right but somewhat wrong, often in crucial parts.

On the bright side I did find an absolute belter of a vibed site and it was only mildly wrong but I was able to sort that bit out and to be fair I think it was written up by an expert with help from a LLM and had a genuine human mistak in it.

Anyway, I suggest you might like to look at the internet as a whole as a paradigm shift and reserve judgement on LLMs and this decade's version of AI.

Do you really believe this?

It isn't absurd to think this is one of the most consequential technologies ever. It probably doesn't make sense to rank technologies (which build on top of each other after all) by importance, but it's fairly clear this is a historic breakthrough.

There's also fire.

Writing was very important, I'm not so sure about industrialization, maybe as modern men we might think that way. But human life was perfectly liveable and conceivable without it. Even writing. Big civilizations like the Inca empire didn't really have writing (although they had the quipu system for record keeping).

If there's a civilization collapse, we will still be doing fire and agriculture. We probably won't be doing industrialization and computers.

In fact you could reasonably argue that life for most people didn't change that much from establishing agricultural settlements all the way up to industrialization. Most people spent most of their time procuring food and clothing/shelter using roughly similar methods.

Yes, Kimi K3 appears a touch below them both, but above all other models. So I'd say a few weeks behind, not months now...

I wouldn’t be surprised if OpenAI (so much for “open”) is using GPT-6 internally already.

It appears that peasants like us are not going to get access to frontier AI anymore at any price.

This would be more impressive if their software and delivery quality was higher.

I have their highest subscription, so it's not that I can't find uses for it and it has sides to it I really like, and it performs really well in some situations, but 2.7 also gets totally lost on tasks Sonnet and Opus has no problems with, and it looks like that is still the case with K3.

That said, I'm doing things with these models that are a lot more complex than the average app people will throw these models at, so I'm sure there are lots of use cases where it will perform better than what I'm seeing.

They're clearly quantised - spelling mistakes, wonky thinking section dividers, missing whitespace are the immediately obvious tells but along with that comes degraded quality, and it seems to vary based on time of day.

I wouldn't be surprised if Kimi did similar things with their subscription plans - try using it through openrouter and see if you notice different behaviour.

I don’t know for sure that they are weeks or months behind. I doubt anyone outside of 3 letter agencies knows that. The pace of AI is crazy fast and China is notoriously secretive. We could be comfortably ahead or China could have the top model by the end of the year.

I don’t think any of us have enough information to know what’s really going on, but I suspect it’s a very tight race.

So it's not 6 months but it's also not a few weeks.

The preview models were not as good as the final release. Thus training must have continued after the initial announcement

Fable has been out for more than a month - I didn’t have the preview version and I was using it around June 10th, when my Claude subscription expired. Saying “Fable only really came out 2 weeks ago” is just factually incorrect all around.

Destroy any hope of profitability, prevent further capitalization, ultimately bankrupt them.

Hasten the popping of the AI bubble.

Drag down the stock market.

Put a dent in the GDP (alleged growth).

Cause investors to pull back, further depressing economy.

Devalue the dollar. Kicking off an interest rate doom loop.

Challenge USA's hegemonic role in the emergent multi-polar (post neoliberal) world order. (Gleefully supported by the ruling coalition's anti-globalist America First faction.)

It all makes perfect sense.

There might be foreign policy implications but the biggest reason is really nurturing their own tech independence and entrepreneurship.

The US is a barrier to a number of key Chinese goals, like reunification with Taiwan. So of course most of what they do will take the US into consideration.

At valuations of about trillion each, I don't know where else they'd go..

China also benefits massively through all of the commodity hardware they make. Sure, they aren't competitive in the chip arms race, but they dominate all the component and power electronics markets. Think about all the power supplies and other commodity components needed to build a gigawatt-scale data centre.

For each "AI tech giant", there are millions of other US companies that will benefit from broader AI availability. US economy (and US tech economy) != Anthropic + OpenAI.

Every other player, especially domestic, would benefit if USA's monopolies get busted. Ditto usurers, trusts, monopsonies, cartels, etc.

Also China's silent but powerful support of Russia and its invasion.

You can't expect them to start sanctioning Russia for ukraine, Israel/US for their middle east shenanigans, etc.

people fleeing north korea already often head towards china

China wants to happily trade with the rest of the world (absolute horror, truly).

China could never support a pro-Western Ukraine in the first place. The same logic applies to Iran, North Korea, etc.

Although China cannot directly express support because of foreign trade, things like the Communist Youth League playing "Katyusha" on the day Russia launched the invasion, and the information direction on social media, have already made their position very clear.

  > Energy is not the main reason. China would still stand with Russia without energy.

Weak Russia is more beneficial for China to buy commodities for cheap and then sell Chinese products back.

  > China could never support a pro-Western Ukraine in the first place.

So nope - China dont care. They are trading with both Russia and Ukraine.

The CCP government has absolute control over domestic public opinion. The pro-Russia direction on Chinese social media is very clear, although as the war became unfavorable for Putin, voices supporting Ukraine have been allowed a little more in recent years.

What the US supports is what China opposes. From Iran to Venezuela, from Gaza to Ukraine, except for a very small amount of "human consensus", it is always and will be like this.

Of course China does not support Ukraine politically, but that's a different story.

Isn't that valid for _any_ AI training? Let alone the "frontier stuff".

I also have a suspicion that the benchmark numbers are not real.

1. There is a “space race” mentality happening at the national level with respect to AI. So, China is committing to the race.

2. Even if the race turns out to be a dud, China is hoovering up massive amounts of data as customers throw everything into their prompts. This is useful for all sorts of national objectives. Why hack when you can just put up a shingle that says “Artificial Intelligence” and customers hand over their data willingly?

Either way, China wins.