Regular readers know that I’ve projected China winning the AI market (not necessarily the race). The argument is simple: Chinese AI is a lot cheaper and it’s open source, which means you can’t be cut off or arbitrarily have your price raised or the AI crippled with restrictions. (Well, not easily.)
Chinese open models are cheaper and come with less risk. Most of the world will use them. The frontier models are, sometimes, better, but the open models are about 6 months behind at most, it’s not enough.
The rule for competing with Chinese companies is simple: you must be more advanced and stay more advanced. Anything they can make, they can make cheaper than you can, with a few exceptions, mostly outside of manufacturing.
But there’s another issue. Chips.
If you’ve needed to replace your computer or phone you know that chip prices have gone WAY up. Even the low and middle tier stuff is way more expensive than two years ago as AI companies hoover up chips for data centers. (Many of which won’t be built, and most chips are actually in warehouses.)
China’s been working on chips, hard, ever since Trump’s sanctions in his first term. They’re going to scale and since they’re good at doing things cheap as they scale they will take over the low and middle end CPU, memory, GPU and other chip markets, while US/Korean/Taiwanese companies sell to American AI companies.
When the AI bubble bursts, and it will, not because AI isn’t a real tech, but because this is a bubble the companies that ignored consumers to make record profits will find that China has taken over the markets they used to own.
Then China, because it actually does most of the low and middle end manufacturing, in country, will beat them on advanced chips, because the tech lead goes where the manufacturing floor is.
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This is… bad, but frankly, I need to replace my computer in the next couple years so I’m not crying. If Western companies don’t care to sell me their products at reasonable prices, yeah, I’ll buy Chinese.
The loss of high end markets has already started:
Huawei AI NPU Servers to Land in Korea in Q4, Throwing Down the Gauntlet to NVIDIA Huawei will launch its artificial intelligence (AI) accelerator chips in the Korean market for the first time in the fourth quarter of this year. Following the completion of a distribution agreement covering domestic sales, the company has been observed preparing its sales operations, including technical training and pricing policy development. Amid exploding demand for AI infrastructure, Huawei is expected to knock on the door of the Korean market by positioning itself as an alternative that resolves dependence on NVIDIA and offers price competitiveness.
A little math. Each 910 chip has 70% of the compute of the NVidia alternative, but draws 40% of the power.
There’s one other thing to bear in mind: the massive construction of data centers in the West is driving up energy prices and that drives up costs for every manufacturing company in the West, so even outside of chips/AI Western industry will be less price competitive.
If it wasn’t for European and Japanese leaders, I’d think that America has the stupidest leaders in the world.
Greg
“I’d think that America has the stupidest leaders in the world.”
Stupid people elect stupid leaders. And man, are Americans dumb these days. They elected Donald Trump, *twice*.
DMC
It wasn’t just stupidity. It was desperation. And it was the bullshitification of American politics. Bullshit was always part of the formula but then came an individual(Trump) who was prepared to bring the bullshit by the metric ton against people who had been used to bringing a few bushels at most. “We might cut your taxes a bit” looks pretty weak compared to “I’ll make you all millionaires, all the sinners will die and I’ll get you sex with Lady Gaga”. A lot of people are going to figure “if even 10% of that is true, I’ll be better off than I am now”. And that’s all it takes for faux populist crypto-fascists to get into power. That and a persistently ineffectual political establishment.
cc
Re: “If it wasn’t for European and Japanese leaders, I’d think that America has the stupidest leaders in the world.”
From Hua Bin (Oliver Hua):
“A Mr. Thomas Smith, who is a local small-batch salsa creator, won a major upset victory over a Mr. Amir Hassan, US Navy veteran officially endorsed by Trump.
What was strange was two-fold: first, Thomas Smith quit before the election as he failed to raise money and interest; second, Amir Hassan was much more favored in theory.
Hassan was a navy vet and well-respected conservative who raised 50 times more money than Smith. Trump even went on the stage to rally for him a week before the primary.
However, Smith’s name remained on the ballot due to a missed deadline to withdraw.
Then came election day. Smith received 50% of the vote against Hassan’s 33%.
Election experts attributed Mr. Smith’s electoral success entirely to his Anglo-Saxon name over his opponent’s Arabic-sounding name.
The irony is Hassan is an African American without any Middle Eastern background. He is a Christian.
Talking about rallies, it never fails to amaze me how politicians in the US seem to spend more time campaigning than governing.”
https://huabinoliver.substack.com/p/selecting-leaders-in-china-part-1
Given the anecdote above, is the public actually well enough informed to elect good leaders, or is it just easily manipulated and swayed by the Western media machine pushing the spectacle of the Blue vs Red cats divide?
Ian’s post was about producing AI and producing chips, but it traces back to producing leaders (which then affects everything else the country’s system produces.)
Winning in leader production-selection can be considered a necessary precursor to winning in AI or or chips.
spud
if A.I. is new tech, its simply a recycled search engine, that steals from others, then tries to give you want you wanted, many times incorrectly.
its hardly lets say the creation of flat screens, lcd’s, silicon chips, computers, solar panels etc, that really changed the world.
we have had computer programs like A.I. for decades, only much smaller in scale. programs that at a key stroke, create music, art, and voice, etc.
A.I. is just a much bigger program.
today the capitalists idiots running the car companies want outright bans on chinese imports, it it happens, the gray market will explode, and the idiots running the car companies that put automatic turbo 200 transmissions made for the citation and vega, into three quarter ton trucks, and gutted the volt and impala for more gas guzzling outrageous priced trucks, will simply collapse in a short while, while still trying to goose stocks for buy backs.
gas powered cars when the future is smaller, electric vehicles. watching polaris and arctic cat, waste their 4-wheel off road vehicles, without investing in them to compete against the same vehicles china is making, is beyond short sighted greed driven stupidity.
https://www.linkedin.com/pulse/one-signature-2000-gutted-americas-manufacturing-now-were-alimov-wainc/
One Signature in 2000 Gutted America’s Manufacturing. Now We’re All Living With the Consequences.
Firuz Alimov
Published Jan 17, 2026
+ Follow
Or how Bill Clinton’s gamble on China hollowed out the American middle class.
Then, with just one signature in 2000, President Bill Clinton changed everything.
But even at the time, there were voices of dissent within America. The people that could see what this deal meant were furious. And it culminated in the famous Battle of Seattle of 1999.
Five days. 60,000 people. Tear gas, rubber bullets, broken windows, police brutality, and millions of dollars in property damages. Thousands of anti-globalization demonstrators blocked the streets around the convention center, and things escalated quickly.
Over the next 25 years, a set of dominoes would fall. The very economic fabric of America and the world would be changed forever. In many ways, it planted the seeds of today’s chaotic trade war and devastated whole communities across the Midwest and South of America.
The Great Hollowing Out
Labor unions, economists, and members of Congress warned Clinton that American manufacturers would not be able to compete with China. They pointed out that this would cost American jobs. They stressed that China had no real labor standards.
Clinton’s signature almost immediately triggered an economic migration. American companies rushed overseas, particularly to China. The attraction of significantly cheaper labor was too strong to resist. What company could resist cutting production costs by more than half?
Jobs that were once secure in American factories vanished rapidly. For the first time since 1947, when records began, capital investment in manufacturing, that is plant equipment and manufacturing technology, actually declined in the 2000s.
Over time, China’s manufacturing capabilities became so advanced and so efficient that even well-funded US firms could not compete. Ironically, American companies now often lack the complex manufacturing expertise on the scale of China.
Today, America is stuck with Clinton’s legacy. A giant trade deficit, a fragile economy, and rising tensions with China. Clinton’s gamble effectively hollowed out America’s manufacturing base and eroded the middle class.
In the wake of growing public discontent, the US government began pushing back. Under Trump’s first administration, a limited trade war with China was launched. There were targeted tariffs on hundreds of billions of dollars worth of goods.
And although this next point is mostly forgotten now because everyone is so divided, this was actually a bipartisan issue. Left or right, everyone agreed.
In fact, President Biden largely continued this approach, even expanding tariffs in some areas such as electric vehicles and semiconductors.
The real tragedy isn’t that Clinton made the deal. It’s that every president after him watched manufacturing cities collapse, watched communities devastate, watched the middle class erode, and did nothing substantive about it.
And now we’re all living with the consequences.
Rust Belt cities in ruins. An opioid epidemic that started in the exact communities that lost manufacturing jobs. A trade deficit approaching $400 billion. Dependence on a geopolitical rival for essential goods. And a manufacturing base so gutted that we couldn’t even produce masks during a pandemic.
That’s the legacy. Not just Clinton’s. All of them.
spud
yep, so called A.I. has been along for a very long long time, there is nothing artificial intelligent about it, it has to be programmed.
https://www.youtube.com/watch?v=y-aP1TiVnus
No, These Guys Did NOT Invent AI – Guess Who Did!
193,361 views May 28, 2026
In this segment Jimmy and Americans’ Comedian Kurt Metzger argue that AI was not invented by tech billionaires like Sam Altman, Elon Musk, or Jeff Bezos, but rather by government-funded researchers at Dartmouth in 1956, with decades of subsequent funding from DARPA—the same agency that invented the internet—paid for by American taxpayers. they note that companies like Anthropic (backed by Bezos) downloaded millions of pirated books, including Jimmy’s, to train their AI without permission or payment, leading to a $1.5 billion lawsuit settlement.
Jimmy contrast Bezos with Andrew Carnegie, who gave away 90% of his fortune to build 259 free public libraries, while acknowledging that Carnegie was no saint either—as one example of his misdeeds, he drowned over 2,000 people in a single Pennsylvania town. The two hosts point out that Marvin Minsky, called the “father of AI,” was a close friend of Jeffrey Epstein, linking the AI industry directly to the Epstein network.
mago
go spud go
edwin
I really like DMC’s comment about desperation. Desperation is very important. I think that it’s been four president election cycles that the US population has been trying to find alternatives to the status quo. The US system consists of guard rails that constrain public opinion – a trap.
It’s easy to forget the man who started the ball rolling towards the Ukraine War by expanding NATO after the US agreement not to expand it – Bill Clinton. It is also easy to forget the people who pretty much sealed the war by overthrowing the Ukrainian government – Joe Biden and Victoria Nuland during Obama administration, then putting icing on the cake during his own Presidency. By the end of his term it looked like sleepy Joe was going to sleepwalk into a nuclear war with Russia.
Donald Trump was successful in negotiating a peace deal with Russia. Don’t get me wrong – Donald Trump is amazingly bad as a president. Among failures of almost everything he has placed his hand at, he was completely unable to convince/coerce Ukraine or Europe into supporting it. Still, attempting to create peace with the largest nuclear power in the world seems to me to be a whole lot better than playing nuclear chicken with Russia.
https://www.youtube.com/watch?v=M0MpV8RdDlk
John Mearsheimer starts at 31:34
A grook with no reference to the two party system
To wear a shirt that is relatively clean
You needn’t ever launder off the dirt
If you possess two shirts to choose between
And always change into the cleaner shirt.
Piet Hein
Purple Library Guy
Isn’t the AI bubble kind of already bursting as we speak? The tech stock markets are falling and nobody seems to know whether Anthropic’s gonna be able to pull off its much-touted but now somewhat-doubted IPO. Microsoft pulled out of a sizable AI-related deal, various other stuff is happening, kind of looks like it’s all starting to unravel.
Somewhat to my surprise, Chinese AI-related stocks apparently took a drubbing first, although it’s not as big a deal since as far as I can tell in China the stock market is more of a side show.
Which suggests to me that Huawei’s charge to try to be the one building data centres in Korea will be kind of like getting way early to the start of the lineup for the big premiere only to find that the theatre has shut down.
Jan Wiklund
The stupidest leaders of the world… well, here is an example outside the tech world: https://responsiblestatecraft.org/midterm-election-ukraine/
I have wondered the last ten years or so why their decisions – and their genereal behaviour – seem so stupid. Perhaps they aren’t, if you consider their main concern.
And that is, according to the Mexican conflict researcher Nel Bonilla, to strengthen the network. All other considerations are of no value for them. See https://worldlinesletter.substack.com/p/incompetent-or-imperial-rethinking.
Of course, it will only last for their lifetime, if that. But a fat pension is not the worst.
Feral Finster
https://www.un-diplomatic.com/p/nvidias-china-contradiction-versus
Provided for comment and not necessarily for truth.
Mark Level
I’m with mago, go spud go. I’ve watched the rise of ubiquitous AI with scant interest, I know it “matters”, it’s what the MOTU’s (Masters of the Universe) imagined they could replace the human work force with, to further the enshittification of everything, & drive down wages and up profits. DMC cites the “Bullshitification” of ‘Murican products, in July Harper’s did an insightful piece on Enshittification, primarily in subscribed products, say your Netflix or similar diversions. Write a good product, lock everyone into recurring subscriptions (every month or 3 months) that are very difficult or impossible to leave, then neglect your Cash Cow, dumb it down, send it in the wrong path, hope the dupes are too lazy to quit & keep watching the slop, or forget they’re paying for it.
I thought “Better Call Saul” was not bad for awhile, but how many knockoffs of Breaking Bad were there, and how many of them were actually good? Bad faith and scams are baked into all 21st Century Euro-Canadian (etc.) Market offerings. The rare clever success is the exception, not the rule. I imagine the economics of US Chip productions are based on importing lots of Indian and other Asian tech workers on H-1B Visas (wildly promoted by Elon, Trump et al when they slept into office again), pay less with the belief coercion will get you more. Sideline American workers, we don’t need them, some will inherit their Boomer grandparents’ equity and at least not be homeless, if they’re lucky.
Speaking of Chinese excellence, yesterday I watched a nearly 2 hour clip of the well-regarded Professor Zhang teaching his High School Class in China, a lengthy, well-sequenced lesson on “Why Putin invaded Ukraine” in 2022. In English, with translated Russian novels, music like Tchaikovsky, deep analyses of 2 Dostoyevsky works, etc.
He started with Medieval Russian history, the Mongol conquest and occupation, Russians’ belief that they are equally Viking aside Mongol, rational and Christian and Pagan, he heavily emphasizes that the Christianity practiced has next to nothing to do with Western (Catholic and Protestant) models, and due to the harsh climate and the history of Wars with neighbors (some very distant like France and England) constantly invading and trying to steal their resources, plus a violent Autarchy until WW II and the Bolshevik Revolution . Closer cases like Russia’s rivalry with neighbors to dominate Korea, etc.
He used a straight lecture format, leavened with video clips, granular analysis of works like Dostoyevsky’s Grand Inquisitor account in The Brothers Karamazov. Zhang was deeply engaged with the materials, took questions near the end, was nuanced in offering varying interpretations and did not in any way dumb down the material. I found his take on Crime and Punishment and the Brothers K to be provocative, he thinks Russian society generally refuses Western “pragmatic” Instrumentalism, preferring to act instinctively and from the Heart. (This may be true or an oversimplification, but a good argument could occur around his take.)
When I was teaching history, sociology, psychology etc. I had a similar approach. I was definitely one of the more challenging teachers at my school (by reputation), but I cannot honestly report that many of my students were likely at the level of engagement that Zhang’s students were. Their culture, I think (seeing it from a great distance) emphasizes hard work, focus, depth and not just bullshitting things, plagiarizing online, or “Fake it ’til you Make it” approaches to learning.
Once we had an administrator return to our district who I previously liked and respected, she had gone elsewhere and then returned. She came back in 2011 during a tough 3 years for me after the ’09 Greenspan-Summers Crash and the Obama bailout of the Financial Fraudsters, when I was forced to work at 2 different High schools, trying to run Library services for over 3,000 students with only the support of a paraprofessional part-time, something like 60% of the school week. (The Library aides weren’t well paid, the two I depended on for many years both had serious chronic health problems and were often out sick.)
The admin who returned, TS, had the respect and even love of the 2nd school I was teaching at, promised she would really work hard for the students and that she would not be a “Fake it ’til you Make it” admin. That promise was in fact a signal of the coming betrayal, she was exactly FITYMI, by the end of the first year of the couple she lasted offloading her job onto underling Admin, coming in late and leaving early, and running endless North Korean style “team-building” bullshit meetings for staff that wasted time, and for those of us who actually valued interactions with students were deeply demoralizing.
Across US Institutional-Managerial precincts, let’s face it, in 90% of cases with few exceptions of “Human Resources” departments, it’s just phoned in, not serious, working straight out of a Manual which is rote and uninspiring, emphasizes surface over depth, and mediocrity (if you’re lucky) and not really pushing the envelope or seeking real excellence.
The Fordist production model still dominates, even in a field like Education which it is not remotely suited for. Then you have all the 21st Century pathologies of power–economic & racial inequality, police violence and security in schools, cliques, poor quality services often viz nutrition and infrastructure, apart from Corporate-sponsored initiatives like laptops for every student.
And the public schools I taught in were in most respects far better than the competing Charter Schools, given more resources, but more openly Late Capitalist and openly willing to destroy Unions, center scripted “learning” from Corporate Thought Mills, neglect and write off Special Education-branded students.
By the 1980s the Soviet idea of Exceptional Workers boosting the society and State had become a cynical joke, thus you had the rise of the Gorbachev class that auto-destructed the little of value that was left, and led to collapse. As spud notes with many others, Clinton deindustrialized the US during the same time, created a bigger Carcereal State and fewer quality, sustainable jobs and community services (other than policing and prisons).
I’ve seen AI do some good things in film and propaganda (think of the Iranian Lego videos, which have actually clever, informed people behind them) but mostly it’s slop. If the society wants slop, it can have it.
Look at the difference between countries where the leadership have the common good in mind, China, Russia, Iran, Mexico to some extent, some others, vs. the Western Neoliberal-Neoconservative Financialized Model. At this moment I’d say Macron’s Austerity, racialized and underfunded “France” shows pretty well what the priorities are. And the results are riots in the Streets, massive cynicism and alienation. Look at the European Union, a massive joke.
If Che was right and the actual Revolutionary is motivated by love, what happens to all the societies that are motivated primarily by greed, nihilism and profit? Well just have a look, it’s not exactly hidden. But hey, you can design AI to run things in that case, it’s not alive, and people don’t matter much.
Richard Holsworth
Chipe Ahoy.
A growing “reverse brain drain” is seeing thousands of U.S.-trained scientists and researchers of Chinese descent leave the United States for China. Studies by institutions like Stanford, Princeton, Harvard, and MIT show that thousands of Chinese-born or Chinese-descent scientists have left U.S. academic and tech positions. A prominent study highlighted by Stanford SCESCI noted that 61% of surveyed scientists of Chinese descent have considered leaving the U.S., and 45% have avoided applying for federal research grants due to scrutiny and anxiety.
UInvestigations tied to economic espionage concerns, visa restrictions, and federal funding cuts have created a hostile or uncertain environment for many foreign-born academics. OTOH, China has heavily scaled up its domestic R&D budgets, offering competitive salaries, generous lab funding, and high-level institutional autonomy to lure talent back (as detailed by Asia Times). [1, 2]
https://enewspaper.latimes.com/infinity/article_share.aspx?guid=5fe9066c-35b2-4b57-8d30-d3c65b7083ff
Steve Ruis
Re “Even the low and middle tier stuff is way more expensive than two years ago as AI companies hover up chips for data centers.”
I think you meant “… hoover up …” :o)
Richard Holsworth
In American media and social discourse, the shift from overt historical caricatures of Chinese heiritage people, to insidious, more modern, subtle forms of “othering” is apparent in the Huang “affair.”
Richard Holsworth
Another Huang affair 30 years ago, demonstrated how quickly the model minority myth can be weaponized into suspicion. Huang’s corporate success and networking capabilities—traits usually praised under the myth—were recast as clandestine, hyper-efficient subversion. His access to the White House was treated not as political engagement, but as an “infiltration,” suggesting that Asian American success is a facade for foreign influence.
Feral Finster
@Edwin: while you are correct concerning the trajectory of American electoral politics, Trump has not made any kind of peace with Russia and will not be allowed to, even if he wanted to do so.
different clue
@Richard Holsworth,
Two things can be true at the same time. Mythically-ascribed “model minority” behavior may be weaponised for mass-suspicion against targeted Chinese or Chinese-ancestry bunchloads of people.
And Mr. Huang may really be knowingly or unknowingly involved the leakage of some of our toppest most-secretest chip technology to China through his affair with this Singaporean-Chinese business owner. We know that some American Jews give secret stuff to Israel while others who could do so . . . . do not do so. And so it could well be with American Chinese.
different clue
Regarding Mr. and Ms. Huang, I just stumbled upon this reddit-posted article . . .
Alice Huang reportedly instrumental in securing over $7.5 billion of Nvidia AI GPU imports during three-year relationship with Jensen Huang — helped move 240,000 banned chips into China, mostly H100 and H200
https://www.reddit.com/r/technology/comments/1xt0mny/alice_huang_reportedly_instrumental_in_securing/
I hope we actually discover whether this actually happened or actually did not happen. If we discover it actually happened, I hope we discover what it all means and implies for the securement or leakage of those most secretest-of-allest chips.
If it turns out to be false, then warnings against ethnic broad-brushing are very useful and should be heeded. ( Well, actually they should be in any case). But if this turns out to be true, any wannabe ” hansbarist” who sought to help cover this up through broad-brush accusations of broad-brush bigotry will have discredited himself/herself as a weaponizer of accusations of bigotry to advance a certain special hansbarist agenda on behalf of a certain special country.