The US and China are locked in a fierce race for dominance in artificial intelligence. Yet even as tensions run high between the world’s two biggest economies, Chinese AI tools are finding their way into American businesses and research labs.
Chinese open-source AI models, freely available software that developers can tweak and build on, are gaining ground fast among US programmers and companies.
These differ from tightly guarded systems such as OpenAI’s ChatGPT or Google’s Gemini. Instead, models from firms such as Alibaba and DeepSeek let users modify the code to fit specific needs.
A recent report from OpenRouter, a platform for AI developers, and venture capital firm Andreessen Horowitz shows just how quickly this shift has happened.
Usage of Chinese open-source models jumped from a mere 1.2 percent at the end of 2024 to nearly 30 percent by late 2025.
“These models are inexpensive—sometimes free—and they perform well,” said Wang Wen, dean of the Chongyang Institute for Financial Studies at Renmin University of China.
One US business owner, who asked not to be named, said switching to Alibaba’s Qwen models saves his company $400,000 a year compared to closed American options.
“For top-tier performance, you might still turn to OpenAI, Anthropic, or Google,” he said. “But for most everyday uses, that’s overkill. Even big names like Nvidia, Perplexity, and researchers at Stanford University have incorporated Qwen into parts of their projects.
China’s DeepSeek’s Breakthrough
DeepSeek’s release of its R1 model in January 2025 caught many by surprise. This high-performing, low-cost, open-source system challenged the idea that only US giants could lead in advanced AI.
It marked a clear sign of how far China has advanced in the field. Other Chinese models, from MiniMax and Z.ai, have also gained fans abroad. The country is now pushing into “AI agents”—software that can handle tasks like booking tickets or scheduling appointments on its own.
Moonshot AI’s latest Kimi K2, launched in November, stands out in this area with strong open-source features seen as a key step forward.
The US government recognizes the value of open-source AI. In July, the Trump administration’s AI Action Plan called for developing “leading open models founded on American values” to set worldwide standards.
But American firms have largely moved away from heavy investment in open-source. Meta, once a leader with its Llama series, has shifted focus to closed systems.
OpenAI recently released a couple of “open-weight” models, less flexible than true open-source, amid calls to return to its nonprofit roots. In the West, only France’s Mistral remains committed to open-source; however, it trails far behind leaders like DeepSeek and Qwen in adoption.
“Western open options just aren’t as compelling,” the anonymous US entrepreneur said. China’s government has backed open-source development, even if profits are unclear.
Mark Barton, chief technology officer at OMNIUX, is considering Qwen for his work but worries clients might hesitate about its Chinese origins.
With the current administration’s tough stance on Chinese tech, potential risks linger, he said. “We don’t want to rely too heavily on a provider that might face sanctions down the line.
But Paul Triolo, a partner at DGA-Albright Stonebridge Group, said there were no “salient issues” surrounding data security.
“Companies can choose to use the models and build on them…without any connection to China,” he explained. A recent Stanford study published posited that “the very nature of open-model releases enables better scrutiny” of the tech.
Gao Fei, chief technology officer at Chinese AI wellness platform BOK Health, agrees. “The transparency and sharing nature of open source are themselves the best ways to build trust,” he said.
US-China Chip War
Aug 2022: Biden’s Chips Act
Joe Biden, then US president, signs a bill to boost domestic chipmaking—an industry Washington fears China could come to dominate through mammoth state-backed investments.
His Chips and Science Act includes $52 billion to boost microchip production, which is vital to almost all modern machinery.
Oct 2022: Export Controls
Washington restricts exports to China of some advanced chips used to train and power artificial intelligence on national security grounds.
It also toughens controls on the sale of chipmaking equipment. China says the country is trying to “maliciously block and suppress Chinese businesses.
In December, the US blacklists 36 Chinese companies — many with close ties to China’s defence sector — severely limiting their use of US chip manufacturing tech and designs.
Oct 2023: Tighter Curbs
A year later, with OpenAI’s ChatGPT and other generative AI tools booming in popularity, Washington tightens the screws.
Attention has so far been focused on Nvidia’s industry-leading H100 chip, but the government is widening export curbs to other, lower-performing semiconductors.
Dec 2024 – Jan 2025: Biden’s Final Moves
Ahead of Trump’s return to the White House, Biden imposes a series of new rules on advanced chip exports to China.
“The US leads the world in AI now — both AI development and AI chip design — and it’s critical that we keep it that way,” Commerce Secretary Gina Raimondo says.
One rule requires authorisations for re-exports and in-country transfers, a bid to avert any circumvention of chip supply to China.
Jan 2025: DeepSeek Shock
Chinese startup DeepSeek stuns the AI industry with the launch of a low-cost, high-quality chatbot, challenging US ambitions to lead the world in developing the technology.
April 2025: Nvidia’s H20 blocked
NVIDIA has developed new H20 semiconductors — a less powerful version of its AI processing units designed specifically for export to China.
But the company says Washington has required it to obtain licences to ship H20s to China over concerns they may be used in supercomputers.
NVIDIA CEO Jensen Huang campaigns against the moves, saying he is “willing to continue to plough deeply into the Chinese market.
May 2025: Trump Eases Rules
The Trump administration rescinds some Biden-era chip export controls, responding to calls from countries that say they are being shut out of crucial technology needed to develop AI.
Sep 2025: ‘Nanoseconds Behind’
In July, Nvidia says it will resume H20 sales to China because the US government has said it will grant it a licence to do so.
But soon, Beijing reportedly bars Chinese firms from buying them — pushing companies to choose domestically produced chips instead.
NVIDIA’s Huang warned in September that the combination of US curbs and Beijing’s policies would fuel the rise of China’s chip industry.
“They’re nanoseconds behind us,” he said. “So we’ve got to go compete.”
Dec 2025: Trump-Xi Agreement
US President Donald Trump reached an agreement with Chinese President Xi Jinping to allow Nvidia to ship H200 chips—a higher-end product than the H20—to “approved customers in China.
“In a Truth Social post, Trump stated he had informed Xi of the decision, emphasizing ‘conditions that allow for continued strong National Security.’
He noted that Xi responded positively.
“The deal includes a 25% cut of sales revenue going to the U.S. government, a step up from earlier arrangements for lower-tier chips. Trump criticized the previous Biden administration’s handling of the “chip war,” arguing it forced companies to develop degraded products that found few buyers and slowed American innovation.
NVIDIA’s most advanced chips—the Blackwell series and forthcoming Rubin processors—are not included in the agreement and remain available only to US customers.
H200s are roughly 18 months behind the company’s most state-of-the-art offerings but represent a significant upgrade over the H20, potentially delivering up to six times the performance for AI tasks.
The Commerce Department is finalizing details, with similar terms expected to apply to other U.S. chipmakers, such as AMD and Intel.
NVIDIA welcomed the move, stating it strikes a balance that supports American jobs and manufacturing while allowing the company to compete globally.
Some Republicans and national security experts expressed concern that it could accelerate China’s AI capabilities, while supporters argue it prevents Beijing from relying fully on domestic alternatives and generates revenue for the U.S.
- By Agence France-Presse (AFP)
- Edited By ET Online Desk
