From Caixin Global, October 27:
Cover Story
A global race to dominate artificial intelligence (AI) is driving an unprecedented semiconductor spending spree, pitting America’s strategy of massive capital investment against China’s urgent push for self-sufficiency in the face of U.S. sanctions. The chase for AI supremacy has turned chipmakers in both countries into red-hot investment targets.
Over the past month, U.S.-based OpenAI, the world’s largest AI startup, has signed procurement deals with three semiconductor giants — Broadcom Inc., Advanced Micro Devices Inc. (AMD), and Nvidia Corp. The combined orders carry a staggering combined power requirement of 26 gigawatts, enough electricity to power nearly three New York Cities at peak demand. It is a testament to the brute-force, capital-intensive strategy the U.S. is deploying to win the AI race.
While Washington is leveraging deep capital markets to fund its technical dominance, China — increasingly cut off from top-tier American technology — is taking a pragmatic path of domestic substitution. It is building a self-reliant ecosystem and rolling out AI applications at scale. A new generation of homegrown chipmakers and AI firms is emerging, reshaping global supply chains in the process.
The central question now facing the industry is which path will lead to the shores of artificial general intelligence, or AGI, first — a race that is likely to define the technological and geopolitical landscape for decades to come.
America’s all-in bet
Wall Street has embraced the American strategy enthusiastically. Broadcom shares jumped nearly 10% on the day its deal was announced, AMD soared 37%, and Nvidia gained 3.93%. Nvidia — the dominant AI chip supplier over the past two years — has seen its market value climb to $4.42 trillion, making it the world’s most valuable publicly traded company. AMD is now valued at around $378 billion, while Broadcom’s market capitalization has risen 50% this year to $1.63 trillion.
Driving OpenAI’s chip appetite is its Stargate initiative — a $500 billion infrastructure project. In January, OpenAI announced plans to partner with Oracle Corp. and SoftBank Group Corp. to build data centers totaling 10 GW of capacity across the U.S. over the next five years. On Oct. 1, it struck a deal with South Korea’s Samsung Electronics Co. and SK Hynix Inc. to expand high band width dynamic random-access memory (DRAM) chip production to 900,000 chips per month to support the initiative.
However, the rush has raised concerns about potential “circular deals,” in which suppliers such as Nvidia and AMD indirectly fund AI companies to drive demand for their own products. These arrangements, reminiscent of the dot-com era, could inflate both demand and investor expectations. Research firms warn that this structure may be building an AI infrastructure bubble.
The current U.S. bull market, sparked by the October 2022 release of ChatGPT, has driven the S&P 500 up nearly 90%, propelled by tech titans such as Apple, Microsoft, Alphabet, Amazon and Nvidia — all of which have dramatically increased AI-related capital spending.
China’s AI ambitions
Across the Pacific, China’s AI drive is rooted in the pursuit of technological self-sufficiency to close the widening supply gap. A July report from Bernstein estimated China’s 2025 AI chip demand at $39.5 billion. At the time, it projected that a resumption of Nvidia’s H20 chip sales to the Chinese mainland would narrow the gap to just $2.5 billion. Those sales never materialized, however, due to regulatory obstacles on both sides.
As a result, China’s supply gap for AI chips is now expected to balloon to over $10 billion in 2025, with domestic substitution becoming the only viable path forward.
“At the moment, we’re 100% out of China,” Jensen Huang, Nvidia’s CEO, said at a recent Citadel Securities event, noting that U.S. export controls had slashed the company’s Chinese market share from 95% to zero.
As Washington tightens export restrictions, Beijing is intensifying efforts to bridge the technology gap, turning domestic substitution from a policy objective into a market necessity. The result has been an investment boom.
Chinese AI chipmakers have become investor darlings. Companies viewed as potential mass producers have been dubbed “China’s Nvidia” or “China’s AMD,” pushing their valuations skyward and accelerating IPO plans.
Cambricon Technologies Corp. — the only publicly listed AI chipmaker on China’s A-share market. — soared after securing a major order from ByteDance Ltd., briefly becoming the country’s most expensive stock. The company’s revenue jumped more than 43 times to 2.88 billion yuan ($404 million) in the first half, marking its first-ever quarterly profit.
“The market was shocked by Cambricon, and now everyone is looking for the next star like it,” one investor told Caixin.
One frontrunner is Moore Threads Technology Co. Ltd., a five-year-old GPU startup fast-tracking its path to go public on Shanghai's STAR Market with plans to raise 8 billion yuan. Although the IPO is still in progress, speculation has pushed up the shares of several firms with minor links to Moore Threads surged — such as CNCR Group, which holds a mere 0.02% stake but gained more than 56% in three days....
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Since this article was published Moore Threads did their stock offering
"China Chipmaker Moore Threads Soars 469% After $1.1 Billion IPO"
