Your guess is as good as mine for China though.
[1] https://www.joelonsoftware.com/2002/06/12/strategy-letter-v/
The data center side is so bloated anything that eats into it is a huge negative. Their data center business brings in 20x the gpu market. Local open weight models will be what pops the bubble and China will do anything in it's power to enable that pop.
There’s plenty of competition that would be happy to attack them from below, though…
I think memory and ssd design will end up being incorporated into the overall design of the SOC chip. And several companies that can probably will sponsor a existing company or build a foundry going forward. Once again, change or die.
Gaming > Bitcoin > LLMs > Robotics
Jensen's job is to just be one step ahead of the market dynamics to keep the investor dollars flowing.
“Jensen’s job is to just be one step ahead of the market” — how is that a “just”? That’s arguably one of the most difficult things to do reliably (judging by how much payout it can give you). Feels like saying he’s making “just” billions of dollars.
This assumes a) AI is a zero-sum game, and b) we're actually talking about on-prem AI will replace cloud-based AI. I think neither statements are true.
AI is like compute: we'll need all sorts of it, in various sizes, everywhere. I'm sure Nvidia whats to own all the workloads.
On the other hand, I do think open weight, like open source, will win in general.
My only concern is if we can limit the economic impact from lowering investments and causing a 40% market collapse circa 2008/9.
You mean they resisted the idea trying to protect their legacy business, and it ended up all but killing them?
35 years to get back to status quo. Putting a bullet in a golden goose is often considered a bad idea. Everyone is happy they are dead, but if you can't understand why they might try to keep the corpse alive you have never looked at the numbers.
At its peak Kodak was one of the (the?) most well known brands on the entire planet. Anywhere in the world if someone snapped a photo Kodak was more than likely taking a cut, coming and going. They employed as many people in Rochester alone as any digital camera company does today internationally.
Sure it could have been managed better but they were always doomed for a fall. They were a chemical company entering a digital age. Does anybody even care who makes the sensors in iPhones?
IBM was the same way, ironically, the fourth Yankee clipper company had to be dragged into using two types of glasses sitting on the shelf that were patented/created in the early 1960s, both of which later became known as gorilla glass. Steve Jobs had to call them (Corning) multiple times to get them to finally let him use it on the iPhone. Imagine if Steve had contracted out to some other glass company in the far east?
Having the first portable-ish digital camera they could have seen the true value of Fairchild's CCD business, got a stake/bought it/replicated done whatever it took to push the frontier of digital imaging and became the Kodak (old, film-era Kodak) of electronic imaging?
There's no comparable business today because all the things they could have invested in ended up being taken up by different companies, they had the R&D culture, revenue, and distribution. I don't see why they couldn't have been category defining.
Only if you ignore the digital camera sector responsible for probably 99% of all digital photos taken…
Classical example is Microsoft actively undermining mobile because it threatened selling Windows or enterprise licenses.
Or Yahoo fighting Google's model because the latter model's didn't depend on taking enterprise deals to rank results.
They do report it separately from consumer and business sales of gpus used in PCs.
I know a tomato is a fruit but will still be annoyed when someone is pedantic about it because that's dumb.
When the mobile phone is eventually integrated into the human body or some other silly application in the future that will annoy me as well. Congrats on being pedantic.
Definitely not cheap for individuals, but well within SME territory. There are countless small-town, family-owned businesses that had higher startup costs than a hypothetical Kimi-R-Us, Inc.
The Chinese see this as a lift on the entire economy, as it comodotizes the technology to a degree in which many firms can serve many sectors of the economy, a true total-economic win worth the public investment.
The American strategy is built off of private investors believing that with enough money poured into as few companies as possible, one or two firms can come to dominate the entire market and start charging an ever burdensome "tax" on every sector it can touch. Not what I would call a total-economic win for the country.
But it hasn’t seemed like the U.S. powers have been interested in broad growth for quite a long time now. Just whatever can line their own pockets.
Hence, buying up and closing up foreign competition then whining about it when it's blocked: https://www.dw.com/en/china-firm-seeks-damages-over-state-co...
Given that, I would expect that in hindsight OpenAI and Anthropic would spend 40% of what they have on compute if starting over and knowing the actual landscape.
The massive capital allocation was a blind decision and they swung big.
It is still possible that techniques will be developed that create a moat where the massive hardware capex is justified, but US policies of banning competitive GPUs and blocking frontier lab releases makes such things far less likely.
"Escape velocity" for AI is when the open weight models are good enough to help drive the next frontier innovations/techniques. I think we are close to that if not already there, at which point it's a race to commoditization no matter what Altman or Lutnik wish will happen.
Both are however hard and expensive to produce. It's much better for profits to develop and sell the hardware, and copy the software someone else spent resources on.
And now it's all going to become commoditized.
Billion dollar software will be commodity. Salesforce. There are orgs already moving to their own internal tools.
It does not seem hard now to rebuilt Google Search, Google Chrome, Gmail, Gsuite, Netlify, Vercel, Cloudflare, Vimeo, Twilio, or even Stripe. The cost barrier has to have dropped 1000x, maybe 10000x.
We have millions of engineers with the talent to do this. Many of whom are unemployed and have savings and nothing better to do. They could easily carve these markets into pieces.
We shouldn't shut down open weights. It's too late. They'll win, and that's a good thing. Big tech was a thermodynamic bubble of high energy waiting on the dam to burst, and now it has. The genie won't go back into the bottle, and that's totally fine. It's progress.
Now we need to rebuild our factories and supply chains and energy and resource inputs. Because the back half of this revolution is going to be robotics and factory automation. If we don't have the connective tissue in place, we're really going to hurt.
We'll do well if we regrow manufacturing. If we don't, we might be in for a world of trouble.
[citation needed]
In China, it's because they are being heavily subsidized to do the research activity. It's not really complicated -- if you allocate public money for people do to a thing, they will do it.
Research and development of new technologies often is a "rising tides lifts all ships"-type deal, which it is absolutely in the government's best interest to support.
For China, the best case scenario would of course be to control a locked-down best-in-class frontier model that the rest of the world becomes reliant on. The US seems to be beating them at that, and "Everyone is reliant on the United States" is a pretty bad scenario. A middle ground, positive outcome is that no one is reliant on locked-down closed models, so they're supporting that outcome.
It's really not that nefarious.
We only think "government spending is for hippies" in the US, and only when we don't look at public spending like defense bills.
Is it actually true? This seems pivotal because currently most theories rest on the idea that individual Chinese companies are acting in China's overall economic or strategic interest. It's a tough sell to believe they all just do that through implicit desire to align with the CCP's direction. I would believe it much more easily if there were concrete incentives involved.
Remember the Halloween papers?
It’s not that simple. If the US economy goes into a recession, it will take large sectors of the weak Chinese economy with it either directly or indirectly.
It’s probably more accurate to say they don’t want American LLMs to become dominant. The huge US data center build out doesn’t depend on Anthropic and OpenAI anyways. Those data centers can just as easily serve Qwen or GLM models.
Someone loses power for someone else to gain. It’s literally the definition of a zero sum game? China targets areas it thinks it can win and dominate in the future.
China has an effective strangle hold on some key sectors (solar, rare earths) and I am sure they relish this position and the leverage it gives them. You'd be careful not to give away that same leverage to a competing power if you can invest a few billion now and cover your bases.
Seems like the only thing that could avert an intelligence rapid take off. Everyone wins except for shareholders.
Why would they possibly want their largest customer to flounder?
From a Chinese perspective I expect China’s largest customer is China. These days it’s actually kind of wild how many Chinese consumer products aren’t (and won’t be) available at US retailers. And a lot of them are quite good.
For a while now China’s wanted to reduce its dependence on the US for a variety of reasons. And undermining the US tech industry, whose products the US government likes to use as a cudgel, may serve that goal quite nicely.
It's also relatively free right now. Few people are going to run local models, and in the future it's likely that every model being released today will be obsolete. The only real downside is ease of distillation for competitors, but that's probably impossible to stop anyhow.
Making frontier grade models a commodity will make a competitive market where companies compete for business by improving their quality and decreasing their prices. The cost to access frontier grade models will continue be driven down the more competition that enters the market. This commoditization will challenge the valuations of Anthropic and OpenAI.
Some companies (most notably Deepseek) also manage to host their own LLMs so efficiently they undercut all third-party hosting services.
if you do the training then you're in control of the output. For example, recommending your products/services or failing to mention your competitors. You could also automatically introduce backdoors into code deemed interesting, i'm sure all governments are very interested in having that influence.
There’s a lot of value in the same sense there is a lot of value in controlling what Google search results are shown and what people see in the Twitter feed.
I agree. The thesis in the article is interesting insomuch as I had not heard it expressed this way before: US restrictions on GPU exports have made it feasible to train models in China but not serve them. Therefore open model is a hack to get around the export restrictions, since models can be trained internally but shipped out of the country to be served elsewhere under the banner of open weights. I don't really buy this argument - inference is much cheaper than training and they are hosting their models anyway.
I think it is more likely (a) they have the money to do it and they need it for internal reasons - these are huge companies (b) there is a lot of prestige in China associated with besting American technology (c) people are still basing logic on outdated ideas of Chinese capability which are no longer true.
So it is easier than people think for Chinese labs to do this, they need to do it anyway and there is a lot of prestige from opening the weights. It is honestly not that different to why American companies themselves have released open weight models.
Why is it so baffling that people want to build great things? There are plenty of people who are happy building things for a salary and have no interest in taking over the world. Do you find the whole world of open source software baffling? Linus Torvalds and Richard Hipp and Antirez created the world’s most prolific software products and released it for free.
They need their models to be good enough and cheap enough. Then the rest will follow. Companies will figure out how to host them for you efficiently, and you pay them monthly.
I don’t think I will ever want to set up a home server, no matter how inexpensive the hardware gets. At work I still use Cursor (with Anthropic models usually) because it’s paid by my employer, but for private stuff, I’m already using cheap models with OpenCode, and it’s extremely cheap and surprisingly capable.
I think there was around half a year between where the best models became good enough (last year December?) and where the cheap models became good enough (couple of months ago?).
People are happy to pay $50/year per seat to have the extra features and to not have to deal with stuff.
There's an issue at the margins here:
$1000/employee is a massive cost - it has to be deeply justified. $50/employee is like ... $2 out of your pocket. It's an incremental cost. The CFO is happy to pay it if there is a lot of value.
A lot of software is in that later category.
Imagine if gasoline was 1 cent per litre - and there was 'free gas' but it was a pain to use, and you had to check a bunch of things. You may just pay the 1 cent.
AI is not quite that yet, but these dynamics will play out eventually, for a lot of things.
I think France and other parts of the EU are switching over to it. Although that's probably more due to Microsoft's aggressive behavior recently. Agree on the cost thing generally, but I can't help but think that when the hype to "do AI" blows over, people are going to be casting a jaundiced eye towards data security, which probably means self-hosting and sandboxing
The current US govt might have played a role as well.
Americans used to do that too, spectacularly.
Just consider the two alternatives: one is your industrial sector with this incredible new automation and analysis tool available for free. The other is one where it has to pay huge chunks of its resources to overseas companies.
The hope is that AI will open up whole new sectors of economic activity. If you have to chose between exploring that space while potentially being exposed to Chinese tampering, versus just sitting on your hands and doing nothing... well then you take that risk.
I also think the restrictions on OpenAI and Anthropic are somewhat short sighted. In that the guardrails dramatically limit efforts towards securing your own software in many ways. Yes, it's also "dangerous" and maybe there should be a means of identifying "domestic" or otherwise "secure" accounts for those allowed to use the models without the same guardrails in place.
Of course, growth like this can only continue for so long without changing that.
No.
It's a sick joke.
Can you explain where you get that number from?
The information I have:
a) The government took a nearly $9 billion stake in Intel to support its chip-making efforts.
b) The Pentagon took a $400 million equity stake in MP Materials, a rare-earth miner.
c) Sam Altman has advocated that the US government take equity stakes in AI companies. Sen Bernie Sanders wants the US government to take 50% stake in AI companies! Nothing has come of it though.
d) Defense department AI contract value rose to $90.7B in 2026.
So I'm super curious where you pulled that $1.4T number from.
Biggest issue I see is housing has more real value than AI expenditure. Demand is real and isn't based purely on a few companies valuation or marketing spin. Nearly 2 decades later we still haven't caught up to construction rates before the 2008 collapse. When the bubble pops it's going to really suck.
It's China putting pressure on a financing strategy in the US that was always a house of cards. It could also be China democratizing something that should have ALWAYS been democratized. Maybe both when the history books on this get written and absorbed by the winners of the LLM wars.
If it weren't for the massive memory cartel of OpenAI/Anthropic et al, both Mac and AMD would be selling these things.
I repeat, the models are building, modifying and deploying almost anything on github.
You leave us with no choice but to build technologies ourselves. If its bad for Anthropic, well, you could owned the market in China, oh well, you reap what you sow.
China still ends up with production and a easier ability to integrate with other countries. We became a powerhouse after WW2 when all the other countries had their financial bases destroyed. We became a superpower providing the products to others to rebuild. Our market is all about short term growth, service economies, and goals driven by whoever is in office at the time. If they don't have a plan around this exact eventuality I would be beyond surprised.
Basically their system is more robust than ours to a major market event. Who pays for expensive services when they are choosing between food or keeping their economy going. People will pay for the equipment to keep their economy going. Who provides that.