The compute deficit of Chinese Ai companies is real, and it IS THE ONLY competitive advantage that Western companies have.
The only way the U.S. keeps that edge is to prevent distillation.
The only way Chinese companies can make up for the deficit in compute is to distill.
There innovation in great supply on every side of the Ocean. Its about the chips.
And in terms of national security, for the U.S., and for China, its about the chips and the distillation that undermines that advantage.
This is an arms race.
If compute or access to training data were the only issues, then companies like Meta and X.ai (Grok) should be doing better, even Google for that matter. Musk even admitted that Grok used training data from OpenAI models.
While there is no moat as such, there is still a lot of expertise that goes into training SOTA models. There's a reason Google was willing to pay $2.7B just to get Noam Shazeer back to improve Gemini.
Putting aside agentic coding, that is to say, if you judge LLMs as a consumer technology (an old-fashioned idea for the inward-looking tech industry admittedly), then open weights LLMs, even quite small ones like Gemma 4, can likely already satisfy 90% of applications with a bit of help from search and browse tools.
Much of the arms race for better LLMs exists to satisfy only the IT industry's needs.
Good luck not crashing the markets and the economy.
And good luck not staying behind when you can't monetize your gargantuan investments and have little incentives to make your models better as the world moves on.
You got that wrong. The forcing function of compute scarcity is an advantage not a detriment. The amount of investment pulverized in performative model training and dead ends (Hi Sora) should make this obvious.
The only way the U.S. keeps that edge is to prevent distillation. The only way Chinese companies can make up for the deficit in compute is to distill. There innovation in great supply on every side of the Ocean. Its about the chips. And in terms of national security, for the U.S., and for China, its about the chips and the distillation that undermines that advantage. This is an arms race.