China Is Undercutting America’s AI Giants

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**Ed Elson** (1:54)
Welcome to Prof G Markets. I'm Ed Elson. It is July 28th. Let's check in on yesterday's market vitals.
The major indices were mixed as chip stock sold off, Brent Crude fell below $90 per barrel as the US and Iran paused their attacks, the yield on 10-year treasuries declined, the Chinese chip maker CXMT soared more than 400 percent in its public debut, becoming China's new most valuable company, more on that later. And finally, Apple rose more than 1 percent to overtake Nvidia as the world's most valuable company.
Okay, what else is happening? Chinese open models are gaining ground, and Washington and Silicon Valley are starting to notice. In recent weeks, Chinese startup ZAI and Moonshot AI have released models that are competitive with those from US Frontier Labs. The top five most popular models on OpenRouter, a marketplace that tracks usage across AI models, are indeed Chinese. And when a rogue unreleased open AI model hacked Hugging Face during a security test last week, Hugging Face used a Chinese open weight model to defend itself. And you might have thought that American AI executives would use this opportunity to encourage a crackdown on Chinese open weight models. Instead, the opposite happened. His first ever post on X, Jensen Huang shared a letter titled Open Weights and American AI Leadership. And within a couple of days, 50 companies signed the letter, including Microsoft, Meta, Palantir and IBM. Together, they argue that US AI leadership depends on building not just frontier systems, but a strong open ecosystem around it. And they warned Washington against, quote, premature restrictions that stifle competition and drive innovation overseas. Which raises an interesting question. And that is, why would US AI leaders seek to protect the very thing that supposedly might destroy them? Joining us to discuss this, we're speaking with Scott Singer, Technology and International Affairs fellow at the Carnegie Endowment for International Peace. Scott, thank you for joining us. I'd love to just start with the context here.
This open versus closed weight debate that has taken over the world of AI, has a lot to do with US versus China, which is strange and interesting. But I would appreciate if you could just clarify why that is, and how we got to this moment.

**Scott Singer** (4:19)
I think it's really a lot of happenstance more than it was any initial intentional strategy or ideology. If we look at the history of AI model development, a lot of the initial general purpose frontier AI models that were coming out of places like OpenAI and then Anthropic were proprietary. The weights were not accessible to any outside users. So for China, there was a question of where and how they might be competitive on the global marketplace for advanced AI models. So having models for the weights that are openly available and can be used by companies and startups and can be fine-tuned or adjusted.
So they can fit whatever purpose they have. That was the area where China could necessarily compete on having the most advanced capabilities, but they could have leaner, cheaper models that would be useful across the startup ecosystem and for companies.