Lack of profits and the threat posed by western countries are raising concern about the sustainability of Beijing’s AI boom
Trillions of dollars have been wiped from China’s stock markets in recent months amid increasing anxiety about the future of artificial intelligence, as Beijing races against the United States for dominance in the sector.
The STAR 50 Index, which tracks technology and innovation companies on the Shanghai stock exchange, has plunged 40% since June. Other indexes of major companies dropped by about 20% over the same time period.
The precipitous drop has wiped out $2.4tn from the Chinese stock market since May, according to Bloomberg.
AI stocks account for over 40% of the stock market value in China and Hong Kong, according to Goldman Sachs, meaning that any dent in value will send shockwaves across the whole domestic market.
So AI is the modern equivalent to the US/USSR space race? Bankrupt your opponent into investing into a non-viable tech?
AI does have legitimate use-cases as something very good at pattern recognition. Because of that, it’s helpful in manufacturing and agriculture, which is why China is prioritizing efficiency and being low-overhead. The US sees it as a threat, because their models are prioritizing profits and wild promises to gain investment, and this is why they will lose the “race.”
The actual second space is going on right now with the race to colonize the moon, funny enough.
I still don’t know why it’s so hard for people to recognize that AI is incompatible with capitalism. You can’t just have an advanced autonomous system that increases competition drastically for extremely cheap and accessible be something profitable. It’s as if capitalism is forgetting that humans need to earn money to pay for things?
China AI ain’t gonna win. American AI ain’t gonna win. AI gonna win.
China treats AI more as infrastructure than something to directly profit off of, which is why this is a bit of a strange article. Their models are open weight generally, you aren’t legally allowed to replace a job with AI, and their models are optimized to be low-cost and efficient compared to western models. This isn’t a recipe for profit, but for public utility. It’s expected that The Guardian would frame their strategy from the viewpoint of capitalists seeking to maximize profits, though. It’s the same as when the CPC deliberately sank the cost of housing, which was being used as an investment vehicle, and capitalists complained about the market rather than highlighting the new affordability of housing.
The idea of AI as a public utility is pretty cool. But I admit you are an early advocate for this and encourage you to keep pushing it. Edit: my take is highlighting how economically unsustainable the models are under hyper surveillance capitalism, which compliments your take i think.
Again, this fundamentally confuses how AI is treated in China and equates it to the US. Profit is secondary to utility in China, at least when it comes to infrastructure and critical industries. That’s why the biggest companies in China are all state owned enterprises. AI in China is being used for pattern recognition in manufacturing and agricultural work, to help identify patterns for medical diagnosis, etc. It isn’t being used to replace workers. The costs to run, say, Deepseek or Qwen are far below Claude and ChatGPT, so projecting western handling of AI onto China doesn’t make much sense to me.
This is not true either though. China is rapidly divesting from certain AI portfolios and is not immune to the economics of data centers especially as they are energy vulnerable. You can’t just say something is a public utility (which is good btw) and hand wave away costs or operation.
Im sure you realize Chinese state owned operations have gone bankrupt many times in the past and continue to do so.
I never dismissed costs of operation, simply that looking at stock market performance for AI in China to get a view of how it’s treated and where it stands is silly.
Yes true but this article is one of many and the pressures on China’s approach are legitimately mounting. Fair point though. Stock markets dont mean much in china.
Ironically though I think stock market volatility of Chinese AI stocks shows their stock market is a bit healthier on that portfolio compared to the US which has runaway growth built on massive USD quantitative easing.
I think the pressures are exaggerated. There’s a lot of money in discounting China’s approach, considering how much money is invested in the western approach. I agree, the volatility of the stock market in China does actually seem to point to it being more grounded.
So are the stock market claims false?
I’m sure they’re accurate, they’re just not important. AI isn’t seen as an investment vehicle in China.
This doesn’t make any sense if they have a stock market with AI stocks, these stocks have a value assigned to them, and that value makes up 40% of the value of the entire stock market. If these weren’t important and aren’t investment vehicles then why does any of the above exist? You’re telling us that $2.4T evaporating into thin air is meaningless to China?
I’d be willing to bet money that if this article were saying the exact opposite thing, the comments here would be all about how “China is doing capitalism better than the capitalists.” I have zero love for our capitalists here and our absurd AI market, but this disingenuous tribalism is quite ridiculous.
It’s important to understand that capitalists do not run China. The CPC dictates how AI is treated. Chinese capitalists may have tried to make money off of AI like their western counterparts, but this is biting them hard when the CPC clearly demands that AI be developed in an alternative direction. The capitalist class may be trying to use AI as an investment vehicle, but they do not have a say in whether or not that actually comes to pass in a practical manner.
A good analogy is the housing industry. Real estate was made an investment vehicle by the capitalist class, only for the CPC to intentionally deflate the housing market. Housing prices fell, which cost lots of Chinese capitalists lots of money, but they had no say in the matter. The CPC dictated that houses were for living, not speculation, and then capitalists were forced to deal with the reality set without their consent.
Is this just due to the stockpiling of chips and data centers?
I guess it makes sense coming from a country that built empty cities, but are they speculating the was the west is?
Like where were they hoping to make money?
Like where were they hoping to make money?
Probably by selling before anyone else does. Of course that is unrealistic but gambling addicts aren’t known to be calculating or reasonable. This is a result from a long chain of bad decisions. The same kind of bad decisions big tech and it’s investors have made in the West too. It looks like AI isn’t one bubble but a pile of foam that’s starting to melt before our eyes. Bubble by bubble. Today it’s China and tomorrow it’s us.
The issue is the promised profits (edit or lets say productivity to avoid capitalist terms) simply never materialized and its a heavy burden on an over leveraged nation like china. US can buoy massive losses by pumping USD but that can only last so long too. AI is here to stay but the costs to run it, and the value you get out of it, are deeply imbalanced right now and portfolios are starting to show it. Name a VC who thinks AI is hot, none. Anyone with data centre stocks likely feeling some red lately. Its been estimated AI needs to generate 6 trillion in the next few years to cover data centre losses alone https://futurism.com/future-society/data-centers-trillion-capital-time-bomb-bain meanwhile revenues are trending downward. This is very similar to the Dot Com bubble.
Edit: public utilities still have costs of operation even if not pursuing profit. More expensive operations still drag down an econony which is why if you build a state owned power plant you should aim for efficient ones not inefficient ones. These data centres are exacting mass cost on the chinese economy which is energy insecure. These pressures cant simply be ignored by saying oh its okay its a public utility. If we had infinite energy and resources sure. But no one does.
