Former Google CEO Eric Schmidt is warning China is winning AI race with cheaper models
In this news:
Key takeaways
- Eric Schmidt stated China is winning the AI race because Chinese models are cheaper or free.
- The performance gap between Chinese and American AI models has narrowed to about six months.
- Chinese developers use software innovation and distillation to overcome U.S. chip export restrictions.
Eric Schmidt, the former Google $GOOGL CEO, said China is winning the AI race despite trailing the U.S. by roughly six months, because Chinese models are priced lower or offered free and the bulk of global users will turn to them, according to MarketWatch.
Schmidt made the comments in a podcast interview with Nicolai Tangen, CEO of Norway’s $2 trillion sovereign wealth fund, according to MarketWatch. China’s open weight models are priced below the closed U.S. systems, which puts American products at risk of being undercut, according to MarketWatch.
Narrowing technological gap
Schmidt said in May that the best Chinese models sit less than six months behind the strongest American systems, according to Crypto Briefing. The gap had been pegged at between one and two years back in 2025, according to Crypto Briefing.
Schmidt characterized what still separates the two sides as trivial, a matter of “nanoseconds,” according to Crypto Briefing. He also warned that U.S. restrictions on chip exports are starting to fall short of their goals, according to Crypto Briefing.
Software innovation and workarounds
Schmidt attributed the continued strength of Chinese models on less powerful chips to software innovation and workarounds, and he cited DeepSeek as an example, according to Crypto Briefing. Analyses cited by Crypto Briefing also point to distillation, a method that trains one model on the answers produced by a stronger one. Chinese developers use it to offset hardware shortfalls, according to Crypto Briefing.
Other assessments land on a similar figure. A report from the Institute for Progress estimated that the U.S. is roughly six months ahead on frontier AI models, according to Crypto Briefing. Demis Hassabis, co-founder of Google DeepMind, has said Chinese AI firms trail Western capabilities by around six months, according to Crypto Briefing.
Industry leadership and stakes
Schmidt led Google from 2001 to 2011 and is chair and CEO of the aerospace manufacturer Relativity Space, according to MarketWatch. He chairs the Special Competitive Studies Project, according to Crypto Briefing.
Schmidt owns about 1% of Anthropic, a stake positioned for a large payout if the company goes public. He holds nearly 16% of Alphabet, according to FactSet data cited by MarketWatch.
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