The tech duel: China’s AI ascent and the US race to hold the lead

How do you assess the current economic strength of the US compared to China?

The global narrative has largely painted China as struggling, while the US continues to thrive. However, looking at the data, the reality is more nuanced. Historically, China’s GDP growth has hovered around 6%, while the US maintains a target closer to 3%. Inflation dynamics also tell an interesting story − while the US has grappled with persistent inflation, China has experienced near-zero inflation, bordering on deflation.

Consumer confidence is another key differentiator. In the US, confidence remains high, supporting economic expansion, whereas China has faced setbacks, largely driven by uncertainties surrounding government policy and tech regulation. However, despite these struggles, China’s resilience should not be underestimated, particularly in the technology sector.

How does the competition between US and Chinese tech firms reflect broader economic trends?

For years, American tech firms have been the darlings of the market, but that trend is shifting. US companies, especially in AI and semiconductors, have enjoyed sustained dominance, but in recent months, we’ve seen a rotation − Chinese tech stocks are rising, while US tech valuations appear stretched.

China has built a robust tech ecosystem that operates independently of Western infrastructure. While Google, Amazon and Meta dominate in the West, China has Baidu, WeChat and Alibaba. These firms have innovated within their own ecosystem, often with government support, enabling them to develop parallel technologies that rival their American counterparts.

What impact does government support have on China’s AI ambitions?

The Chinese government has been a powerful force in shaping its tech industry. Recent developments, such as President Xi Jinping publicly engaging with Jack Ma, signal a renewed push to revitalise the sector. Beijing recognises AI as a critical battleground and has taken an interventionist approach, backing key firms like Alibaba as they aggressively invest in AI research and development.

In contrast, the US relies on private capital to drive AI progress. However, initiatives such as the ‘Stargate’ project − a significant investment in AI development − suggest that Washington is beginning to adopt a more coordinated industrial strategy. The question remains: can America’s decentralised, private-sector-led model keep pace with China’s state-backed tech machine?

How does China’s approach to AI development differ from the West?

One striking difference is in accessibility. US tech firms, led by companies like OpenAI, operate within a closed, proprietary model, whereas China has leaned towards open-source AI development. A case in point is DeepSeek, China’s answer to ChatGPT, which has emerged as a serious competitor despite the country’s limited access to advanced semiconductor chips due to US sanctions.

The AI battle is no longer just about who has the best technology – it’s about who can deploy it most effectively

Chinese companies are proving adept at innovating under constraints, developing AI solutions that require less computing power than their Western counterparts. This approach may ultimately enable them to scale AI adoption more rapidly, particularly in emerging markets where affordability is a key factor.

Given these developments, should the West be concerned about China overtaking it in AI?

In some areas, China is already ahead. The country produces an overwhelming number of engineering graduates ‒ far more than the US or Europe. It has also successfully deployed AI at scale in applications ranging from facial recognition to automated commerce.

The way the average Chinese consumer interacts with technology is already far more integrated than in the West. Mobile payments, AI-powered retail and high-speed digital services are embedded in daily life.

However, the US still holds a leadership position in AI research and foundational technologies, thanks to companies like Nvidia, Microsoft and Google. The real question is whether the US and its allies can sustain their dominance while facing growing regulatory and geopolitical constraints.

Where does Europe fit into this dynamic?

Europe faces significant challenges in this global race. While ASML, the Dutch semiconductor giant, remains a critical player in chip manufacturing, Europe lacks tech champions of the scale seen in the US or China.

Unlike the US, where capital is readily available, or China, where the government directly funds innovation, Europe struggles with fragmented funding and regulatory hurdles.

If the region does not address these issues, it risks being left behind in the AI revolution. The urgency to build an independent AI ecosystem in Europe is growing, but without coordinated investment, it will remain an uphill battle.

Finally, what does the future look like for the global AI race?

A. We are at an inflection point. The AI battle is no longer just about who has the best technology ‒ it’s about who can deploy it most effectively. China has shown it can make advanced AI widely accessible, while the US maintains its edge in cutting-edge development. Meanwhile, Europe is struggling to find its place.

If current trends continue, we may see a world where China’s AI and tech infrastructure become dominant in emerging markets, while the US remains the leader in premium AI solutions.

What’s clear is that the coming years will be defined by fierce competition, government intervention and, ultimately, a reshaping of global technological power structures.

This interview does not intend to constitute an offer or agreement to buy or sell investments or give investment advice and the contents therein should not be construed as such. Investors should remember that past performance is no guide to future performance and that the value of investments may go down as well as up. The company is licensed to conduct investment services by the MFSA under the investment services act and is a member of the Malta Stock Exchange. The directors or related parties, including the company and their clients, are likely to have an interest in securities mentioned in this article. For more information, contact Jesmond Mizzi Financial Advisors Ltd of 67, Level 3, South Street, Valletta, on 2122 4410, or e-mail info@jesmondmizzi.com.