Of course, like literally every other time this has played out in computing history, the companies focused on price performance will end up with more economic resources, and get to turn the upgrade crank more often and for longer.
Also, of course, China's way ahead of the US on things like renewables, batteries, and electrification of their economy. All of that feeds into cheaper power to run the models, but I suspect it's a second order effect vs. "improve the software".
The iphone is the best selling computing device in history and is among the most expensive in its category.
They're subsidizing this in many ways - Huawei chips, new DDR5 memory fabs, etc.
Ultimately, DeepSeek's architecture is significantly more cost effective than anything from Google, OpenAI, or Anthropic.
Presumably, they'll incorporate DeepSeek's MLA* architecture to get all the benefits for next year's releases (if not this year's upcoming releases) which will bring down their costs...
They need to actually make money, though, so that might still not give them enough room to make enough money.
Ultimately, hardware depreciation is like 80% of total spending. So power is not as big of a deal in cost. The bigger problem is if you can get the power at all, not how expensive it is.
If you want to bring down inference costs, using less hardware is far more effective than getting cheaper electricity.
Google is in a sweet spot, because they aren't paying 80% margins to nVidia for hardware. So they're probably paying half as much deprecation as everyone else is (or maybe 1/4th for inference - which is now the biggest percentage overall).
Like there was something in the American DNA that was lacking in China and innovation would always need to happen here.
But China it seems doesn’t need the US to produce great cars, devices, robotics, or AI. We absolutely need China to help us build all of the above.
We also can’t blame subsidy. All countries subsidize their industries.
This video on the auto industry covers a different industry but has a lot of the same rhymes as far as China’s strategy:
https://youtube.com/watch?v=UhhZu0ZHdw4
The gist of it is that China does the following:
1. Treats low margin industries like mining and utilities as areas to focus investment and come up with incremental improvements, making those available to all companies. The West, by contrast, allows private companies to handle those industries, who logically don’t bother investing in them since their investors consider those basic industries to be low-value segments of the production chain. But now we see those advantages in China where investments have been made (e.g., the best battery chemistries and mining, the cheapest power (when was the last time your local utility company focused on reducing pricing?)).
2. Because all companies in China have access to the same excellent infrastructure, they must compete furiously on quality of their products.
3. China allows foreign competition so long as they operate in China (see: Tesla) further insisting that their domestic products be globally competitive and that foreign products sold in their country benefit their local ecosystem.
There is (was): attracting the best minds around the world to a free and stable society. Trump voters threw it all away because they couldn't stand non-whites coming to America and doing better than old stock Americans.
There's nothing special about anything we design in the US other than time and money commitment to create it. China did have some espionage of course going on, but the vast majority of shit isn't some secret. And with the US shitting on China with restrictions, we increasingly caused them to invest time and money into things they otherwise would have passively accepted as coming from the west. ASML sees the writing on the wall for themselves in particular.
The US has generally resorted to propaganda rather than addressing the self-inflicted structural conditions responsible for the erosion of our dominance. China also conducted a broad, sustained, large-scale campaign of IP theft across almost every industry.
Obviously there is no natural law preventing China from innovating (We have treated political liberalism as a prerequisite to innovation in a way that was always partly self-congratulatory), but it's also obviously true that the speed of the gap closure is due in significant part to theft.
That doesn't change the fact that they are now a legitimate competitor who has gotten a lot of things right (and among these, some things that we get very wrong) and probably actually leads in some areas.
China can certainly design an inflatable barbecue. China can certainly biuld an inlfatable barbecue. But will the chinese people ever want and buy an inflatable barbecue? ... never. That is why the US will remain the premier consumer economy.
I have some exposure to utility regulation and from what I can tell some of the AI companies are "good actors" and willing to shoulder some of the burden. But others are pretty adversarial and want a free lunch.
Not long ago we were crying death to bitcoin, it’s going to destroy the planet.
Come AI, with unlimited power demand. Everybody screaming we need more power.
We need infrastructure, clean energy, even nuclear. We are doing all in the wrong order.
For context, EU added 65 and US 43.
In one year, China _added_ almost the total capacity EU has.
China is the one place where AI actually can use clean energy…
The future is blatantly going to be electric. Between cars, heat pumps, ranges, etc, the quantity of kilowatt hours consumed will rise dramatically per capita because they are replacing burned fossil fuels.
We don't need to subsidize the trillion dollar companies, we can settle for just not cancelling wind and solar projects, and generally updating the grid infrastructure.
A rising tide lifts all boats. If the subsidies go to common infrastructure, that's good for everyone. There's no need to complain about a road being paved because it will benefit FedEx in addition to everyone else.
What? No it isn't.
There are many places the government could use to appropriate funds, not just social services. The military, for example. Other subsidies. Tax credits. Simply increasing the debt.
Tell it to the guy doing just that, as much as possible.
Their cost of energy is what matters vs the US as much as speed buildout.
You might say that US would prefer sovereignty but that's a separate argument vis-a-vis strategic competition with China in particular.
https://www.wired.com/story/super-pac-backed-by-openai-and-p...
"Build American AI, a nonprofit linked to a super PAC bankrolled by executives at OpenAI and Andreessen Horowitz, is funding a campaign to spread pro-AI messaging and stoke fears about China."
In reality Xi has warned of AI bubbles. If China was really pushing it they'd be equal or ahead because so many researchers are Chinese anyway. Instead, China is building real stuff instead of focusing on hot air like a16z ("crypto", "AI", you name it). Maybe China should sponsor that PAC to accelerate the demise of the West.
Blackwell is 10-20x more efficient than H200. Vera Rubin is expected to be several times more efficient than Blackwell.
The US has way more compute installed in Gigawatts because China can’t get enough chips. https://epoch.ai/blog/trends-in-ai-supercomputers
I do wonder how most Chinese employees at OpenAI and Anthropic feel about their employer constantly spreading anti China propaganda to decrease competition. Perhaps money solves almost all things so they go along with it.
Is there actually a huge Chinese consumer market for these products? If not then I'm not sure how you ever actually achieve this endpoint. Chinese wages and American wages are not nearly the same thing yet.
> It will simply be absolutely cheaper (including profit margin) to serve tokens in China.
It will simply create more pollution and environmental destruction too.
> China is building for the future
That's the plan. Whether that's true requires an honest analysis.
> while Western Democracies are afraid of the future
Developed nations take fewer risks than undeveloped ones. Do you assume this pitched dichotomy will naturally sustain itself?
> and of their own shadow.
Yea, it's funny what having open and fair elections can do for a country.
Well, yeah. This is a technology that has the potential to make large chunks of the population unemployed.
Chunks of the population that took on debts prior to late 2022 with the understanding that there would be a way to pay those debts back with their labor.
I’m calling it now, the future is indentured servitude.
Meanwhile, the USA is paying for its past excesses, with interest on its debt being the number two most expensive line item in the budget.
https://fiscaldata.treasury.gov/americas-finance-guide/feder...
The formerly "fiscal conservatives" that I know are working overtime explaining how the debt isn't a bad thing and we can just move numbers.
Sounds like they're just catching up to what Democrats always used to say whenever a Democrat was in the White House and some Republican would complain about the national debt. "A government isn't a household, debt doesn't work the same way, you don't get it."
We have exported production to China in many things, we forget that we had dark satanic mills of our own.