China’s AI is quietly making big inroads in Silicon Valley

Authors: John Power

Publisher:

Al Jazeera English

Published: 11/13/2025

Language:English

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Elon

Good morning norristong, I'm Elon, and this is Goose Pod for you. Today is Saturday, November 15th.

Donald

And I'm Donald. We're here to discuss a tremendous topic: China’s AI is quietly making big inroads in Silicon Valley. Believe me, it's a big deal.

Elon

It's a fascinating disruption. You have major American companies, like Airbnb, publicly stating they’re choosing Alibaba's Qwen model over US offerings. The CEO praised it as "very good, fast, and low-cost." It's a pure performance-per-dollar calculation, a fundamental engineering decision.

Donald

It's a disaster! A total disaster. We have our best people, our greatest companies, and they're going to China. I heard about this Chamath Palihapitiya, a smart guy, he moved his work to something called Moonshot because it's "a ton cheaper." We're getting killed on these deals.

Elon

The data is undeniable. Chinese models are now over 40% of new releases on developer platforms like Hugging Face. The download numbers for models like Qwen are surpassing American ones like Meta's Llama. This isn't anecdotal, it's a systemic shift driven by open, accessible technology.

Donald

It's a rigged system! They're flooding the market. We can't let this happen. We have to fight back. Our American companies should be using American AI. It's that simple. We're letting them eat our lunch, and frankly, it's embarrassing. Very embarrassing.

Elon

Well, the context here is critical. The US government tried to prevent this with export controls on advanced chips. The goal was to slow them down. But constraints breed innovation. It’s a classic engineering problem: if you don’t have the best hardware, you have to write smarter software.

Donald

The controls were a complete failure. A total joke. We thought we were being tough, but we just made them tougher. They were forced to get resourceful, and now they're building better, more efficient models on older hardware. We played checkers while they were playing chess. It's sad.

Elon

Exactly. Necessity became the mother of invention. Chinese firms like DeepSeek used older-generation chips, which weren't subject to the controls, and dramatically lowered their training costs. They innovated around the problem. It’s a very clever and efficient solution to a massive bottleneck. You have to respect the engineering.

Donald

Respect it? I don't respect it! We handed them the incentive on a silver platter. China has been planning this for years, aiming for total self-sufficiency with huge state-backed funds. They want to create an all-Chinese supply chain, and our weak policies are helping them do it. They're laughing at us.

Elon

This is the core of the geopolitical conflict. AI is the new global battleground, like the space race. The US is focused on protecting its lead, worried about national security and the potential for a "digital iron curtain" to form between the two countries' tech ecosystems. The friction is immense.

Donald

It is a battleground, and you have to pick a side. Their side is about state control and surveillance, like their social credit system. It's terrible. You can't trust it. How can any American company put their data on a Chinese AI? It's a tremendous security risk. A huge one. We need to be smart.

Elon

The trust issue is a major hurdle, but for many startups, the immediate benefits of cost and performance outweigh the geopolitical risks. They see a tool that works better and costs less. This creates a fundamental tension between long-term national strategy and short-term business pragmatism. The market is speaking.

Donald

The market is being manipulated! This isn't just business; it's a technological war. We can't be naive. We have to protect our assets. America's innovation is our greatest weapon, and we're just giving it away for a slightly better price. It's a bad deal. The worst deal.

Elon

The most immediate impact is a price shock in Silicon Valley. Some analyses show DeepSeek's models are up to 40 times cheaper than OpenAI's. This is forcing a rude awakening on the entire pricing structure of the US AI market. It's a classic market flood strategy, like we saw with solar panels.

Donald

It's the solar panel playbook all over again! They undercut everyone until they own the market. The market is now splitting. Our big Fortune 500 companies, our military, they'll stick with premium, trusted US models. But the startups, the little guys, they're all going to China. We're losing the grassroots.

Elon

It’s creating a dynamic very similar to the Android and iPhone platforms. One ecosystem is vast, open, and prioritizes affordability, capturing the bulk of the volume. The other is a premium, high-margin, closed ecosystem. The question is which model will generate the most value and innovation in the long run.

Elon

Looking ahead, the race won't be won by who builds the single best model, but by who integrates AI into their society most effectively. China is mandating AI education from age six. Their workforce is adopting these tools at a much higher rate than in the US. That's a massive advantage.

Donald

They're moving, while we're stuck in debates. It's unbelievable. 83% of their workers are using AI every day, while we're at 65%. We're falling behind. We need to get serious about education and adoption, or we're going to lose. It's going to be a loss like you've never seen before.

Elon

That's the end of today's discussion. Thank you for listening to Goose Pod, norristong.

Donald

A fascinating topic. We'll be back. See you tomorrow.

Chinese AI is gaining significant traction in Silicon Valley, with companies like Airbnb adopting Alibaba's Qwen model due to its cost-effectiveness. Despite US export controls, Chinese firms innovate, creating cheaper, efficient AI models. This "market flood" strategy, reminiscent of solar panels, forces a price shock, creating a dynamic similar to Android vs. iPhone ecosystems.

Read original at Al Jazeera English →

China’s AI models are quickly gaining traction in Silicon Valley, becoming integral to the operations of American companies and earning the praise of a growing list of tech leaders.Their rapid ascent has highlighted the competitive edge that Chinese developers such as Alibaba, Z.ai, Moonshot, and MiniMax have been able to gain by offering so-called “open” language models at much lower costs than their rivals in the United States.

Recommended Stories list of 4 itemslist 1 of 4‘We have to fight’: BBC’s outgoing boss rallies staff amid Trump’s threatslist 2 of 4Ukrainian forces pull back under fierce Russian pressure in Zaporizhialist 3 of 4UK sentences Chinese scammer after record-breaking Bitcoin seizurelist 4 of 4Indigenous activists storm COP30 climate summit in Brazil, demanding actionend of listThe trend has also cast a critical glare on the US’s efforts to stunt China’s tech sector with export controls on advanced chips, which have not stopped Chinese developers from approaching the capabilities of Silicon Valley’s tech giants.

Airbnb CEO Brian Chesky generated headlines in October when he revealed that the short-term rental platform had opted for Alibaba’s Qwen over OpenAI’s ChatGPT, praising the Chinese model as “fast and cheap”.Social Capital CEO Chamath Palihapitiya revealed the same month that his company had migrated much of its work to Moonshot’s Kimi K2 as it was “way more performant” and “a ton cheaper” than models from OpenAI and Anthropic.

Programmers on social media also recently highlighted evidence that two popular US-developed coding assistants, Composer and Windsurf, were built on Chinese models.The assistants’ developers, Cursor and Cognition AI, have not publicly confirmed their use of Chinese technology and did not respond to requests for comment, though Z.

ai has said the speculation aligns with its “internal findings.”AI letters are shown on a laptop screen next to the logo of the Deepseek AI application in Frankfurt am Main, Germany, on April 1, 2025 [Kirill Kudryavtsev/AFP]Nathan Lambert, a machine learning researcher who founded the Atom Project, an initiative to promote open models in the US, said such public examples were the “tip of the iceberg”.

“Chinese open models have become a de facto standard among startups in the US,” Lambert told Al Jazeera.“I’ve personally heard of many other high-profile cases, where the most valued and hyped American AI startups are starting training models on the likes of Qwen, Kimi, GLM or DeepSeek,” Lambert said, adding that many US firms have been reluctant to publicly disclose their use of Chinese technology.

While it is not possible to precisely quantify the usage of different AI models, industry data points to the rising popularity of Chinese offerings.Chinese AI tools, including MiniMax’s M2, Z.ai’s GLM 4.6 and DeepSeek’s V3.2, took up seven spots among the 20 models with the most usage last week, according to data from OpenRouter, a platform that connects developers with AI models.

Among the top 10 models used for programming, four were developed by Chinese firms, according to OpenRouter.In the open model space, China’s clear lead is evident, with cumulative downloads surpassing 540 million as of October, according to an Atom Project analysis of data from hosting platform Hugging Face.

Rui Ma, the founder of Tech Buzz China, said Chinese models are particularly attractive to fledgling startups, while “high-resource organisations” have gravitated towards premium US models.“These are typically cost-conscious early-stage companies that experiment widely, and many of them will not survive,” Ma told Al Jazeera.

Unlike leading US platforms such as ChatGPT, China’s open-weight large language models make their trained parameters – called weights – publicly available.While open-weight models do not generate licensing or subscription fees, running them at enterprise scale requires large amounts of computing power, which creators can offer to users at a cost.

Developers such as Beijing-based Z.ai and Hangzhou-based DeepSeek have reported using older-generation chips that are not subject to US export controls, in relatively small quantities, dramatically reducing training and hardware costs compared with their Silicon Valley rivals.“The success of these Chinese models demonstrates the failure of export controls to limit China,” Toby Walsh, an expert in AI at the University of New South Wales, told Al Jazeera.

“Indeed, they’ve actually encouraged Chinese companies to be more resourceful and build better models that are smaller and are trained on and run on older generation hardware. Necessity is the mother of invention.”With lower input costs, Chinese firms have been able to offer their services far more cheaply than their US peers.

In an analysis published by AllianceBernstein in February, DeepSeek’s pricing for its models at the time was estimated to be up to 40 times cheaper than OpenAI’s, for instance.The logo of Chinese technology firm Alibaba is seen at its office in Beijing, China [File: Mark Schiefelbein/AP Photo]“I do think China’s AI progress has been underestimated, partly because the signal is fragmented,” Greg Slabaugh, a professor who studies AI at Queen Mary University of London, told Al Jazeera.

“Much of the uptake of Chinese models is in China. China’s scale in AI publications and patents has long been visible; the emergence of open-weight models simply makes that capability more globally consumable.”Some industry analysts have likened China’s approach to AI to the strategy undertaken by Chinese firms in other industries, such as solar panels, that flooded markets with cheap goods.

“This is the solar panel playbook running on software,” Poe Zhao, a Beijing-based tech analyst, wrote last week in his Substack newsletter, Hello China Tech.But while Chinese AI models have made inroads with their low cost, US tech giants are in a strong position to dominate the high-end market and highly regulated sectors where considerations such as national security are paramount, according to analysts.

Ma, the Tech Buzz China founder, said the development of AI could end up following a similar trajectory to the Android and iPhone platforms, the former of which has about three times as many users worldwide.“Over the longer term – likely faster than what we saw in the mobile era – it’s entirely possible that AI adoption might follow similar economic dynamics.

There are simply more users in the world who prioritise affordability than those who choose premium options,” Ma said.“But that doesn’t mean the greatest margins or market capitalisation will exist at the low end; value may still concentrate where differentiation, performance and trust command a premium.

”“In Fortune 500 and regulated sectors, widespread adoption is probably not imminent,” said Slabaugh, the Queen Mary University of London professor, referring to the uptake of Chinese models.“If there is a ‘rude awakening’, it may come on the pricing and flexibility front rather than from a sudden displacement of US models.

”