CNBC's The China Connection newsletter: For Chinese businesses, it's not about which AI is the smartest

Will the U.S. oregon China triumph the artificial quality race? That's the large question for investors wondering wherever they should enactment their money.

But frequently, I've recovered that galore companies successful China are asking a antithetic question: Which AI tools tin assistance maine past successful a pugnacious economy?

All this means that investors who take an AI "winner based connected smarts unsocial apt place a bigger story.

First, there's the outgo factor.

While OpenAI's gpt-oss open-weight exemplary and DeepSeek are the cheapest AI models to run – 30 cents per 1 cardinal tokens – Google's Gemini 3 Pro charges $4.50, portion Anthropic's top-tier Claude Opus 4.5 costs $10, according to Artificial Analysis, which benchmarks AI models.

That's a pay-per-use operation that tin rapidly balloon successful terms — whether businesses are utilizing a "closed" AI exemplary from OpenAI oregon remotely accessing an open-source exemplary from DeepSeek oregon Alibaba.

Instead, galore companies successful China similar to power costs by choosing a 3rd enactment — downloading open-source models, James Tong, CEO of Suzhou-based Movitech, told me. His endeavor bundle company's clients see Starbucks and Unilever.

Another cardinal quality with the U.S. is however Chinese businesses are utilizing AI.

Companies successful the U.S. thin to usage AI much for coding, portion successful China, they usage the exertion much for circumstantial situations, according to Tong. For example, since the 2nd fractional of 2025, Movitech has utilized AI agents to assistance manufacturers amended their accumulation processes and assistance state-owned enterprises with compliance.

Locally tally open-source models again acceptable amended due to the fact that they don't necessitate users to upload accusation to third-party cloud servers.

It's a bonus productivity instrumentality erstwhile home request has been sluggish.

Tong said he's had to little merchandise prices owed to economical pressures, but AI has boosted interior efficiency. Without those gains, helium said, the concern would beryllium successful a acold weaker position.

Industry rankings, specified arsenic Artificial Analysis, amusement that the golden modular successful generative AI models inactive belongs to the U.S. But those tools aren't officially disposable successful China.

Beijing's firewall keeps retired Google and Facebook and their AI models, and Anthropic cited nationalist information concerns successful its prohibition on China-owned entities from utilizing Claude, wide considered the champion AI for coding close now.

Yet treatment of starring U.S. models is prevalent capable connected Chinese societal media to awesome that specified technologies are being utilized by section developers. And my conversations with assorted businesses corroborate that they're trying antithetic AI models, including U.S ones, to find 1 that suits their needs.

"When selecting AI solutions, Chinese companies nary longer prioritize 'who is the smartest,'" said Sun Xin, vice president of probe astatine Gartner. Instead, they're looking for reliability, power implicit hallucinations and integration capacity.

Productivity gains, successful particular, are critical.

Thanks to AI, 10 radical tin implicit the aforesaid magnitude of enactment arsenic 20 to 30 people, said Wenhao Zhang, CEO of Beijing-based user selling consultancy Doodod Technology.

As a result, the institution has astir the fig of its clients successful the past twelvemonth to good implicit 100 customers.

Low prices and easiness of entree besides mean China-made models are getting much overseas users, particularly among those who are jumping successful to effort retired the viral open-source AI cause OpenClaw.

Chinese models besides fertile highly connected OpenRouter, a fashionable level that lets companies entree aggregate AI models done 1 portal.

While U.S. models from Anthropic and Google were inactive the top 2 by usage successful the past week, 1 from DeepSeek ranked third, portion Moonshot AI's Kimi's K2.5, besides from China, came successful 4th — conscionable days aft its launch.

Moonshot said that since the merchandise of its latest K2.5 model, its gross from extracurricular China has surpassed that from the home market, arsenic caller overseas users quadrupled.

Reflecting however investors privation a portion of the pie, CNBC reported past period that Moonshot's valuation surged by astatine slightest $500 million successful conscionable a fewer weeks — aft its rivals Zhipu and Minimax listed successful Hong Kong.

As the Lunar New Year approaches successful China, Chinese businesses and tech developers expect that DeepSeek whitethorn merchandise different breakthrough AI update. Just earlier the vacation past year, the Chinese institution released an open-source exemplary with usage costs acold beneath OpenAI's ChatGPT.

DeepSeek's merchandise astatine the clip shocked planetary investors, who thought China could not innovate connected AI without high-end Nvidia chips. Local companies, antecedently locked retired of starring U.S. AI models, started trying retired DeepSeek and akin open-source models developed by Alibaba, ByteDance and section startups.

"As agelong arsenic the backstage assemblage of China continues to person the leeway to marque money, China's innovation tin beryllium kept up with the U.S., past radical are going to beryllium funny successful Chinese equities," said Liqian Ren, manager of Modern Alpha astatine U.S.-based money manager WisdomTree.

As Chinese AI models effort to drawback up to their U.S. rivals, innovation isn't conscionable astir becoming much intelligent — it's besides astir hitting a terms constituent that makes them usable for business.

China stocks were small changed connected Wednesday amid mixed trading successful the region, but bundle stocks took a deed arsenic investors weighed however AI is threatening to automate workflows, compression pricing and little the barriers for competitors to participate the market.

Hong Kong's Hang Seng index and CSI 300 were small changed arsenic of 12:45 a.m. ET. Year to date, some indexes are up astir 4.6% and 0.7% respectively.

However, the Hang Seng Tech Index was down astir 1.8%. The offshore yuan was small changed astatine 6.933 against the greenback.

Chinese bundle companies saw a selloff, amongst different determination peers. Shares of China's Kingdee International Software plunged much than15%, portion unreality major Tencent fell 3.27%. Alibaba lost implicit 1%, while Baidu was down implicit 2%.

The show of the Shanghai Composite implicit the past year.