Understanding the Chinese AI economy requires viewing it as a vertically integrated stack. Value flows differently at each layer, and strategic positioning depends on understanding these dynamics.
Super-apps, chatbots, and embedded AI experiences. Market size: $11.5B with 42.3% CAGR. Leaders: Ernie (200M MAU), Doubao (157M), Tongyi (150M), DeepSeek (143M). Projection: 1B+ DAU by 2026.
Layer 6: Agentic Commerce
Task completion, transaction execution, and tool calls. Hunyuan processes 10B+ tool calls per day; DingTalk AI handles 200M+ requests daily. This is the emerging battleground where chat becomes transaction.
Layer 5: Platform Distribution
Super-app ecosystems, daily touchpoints, user habits. WeChat commands 1.3B MAU. Douyin delivers 600M DAU. This layer is the moat for Big Tech—AI embeds into daily habits, zero-margin inference gets absorbed by ecosystem value, and data flywheels compound over time.
Layer 4: Foundation Models
Chinese models now represent ~30% of global AI share, up from 1.2%. Intelligence Index rankings: DeepSeek 68, Qwen3 62, Seed v1.5 62, ERNIE X1 60, Hunyuan 57. The performance gap to US models is less than 3 months and closing. Inference projected to grow 4.5x by 2026.
Layer 3: AI Cloud Services
Training, inference, MLOps platforms. Market size: $7.3B with 26.8% CAGR. This is the value concentration layer—the enterprise AI gateway where margins are captured.
Layer 2: Compute Infrastructure
Data centers, GPU clusters, national compute network. Investment: RMB 400-500B across 8-12 national hubs. The “Eastern Data, Western Computing” strategy moves data from population centers to renewable-rich western provinces.
Layer 1: Silicon
Huawei Ascend: 35-40% market share, targeting 50% by 2026. Production scaling from 800K to 2M dies per year. Models optimized for domestic chips from the start. This is infrastructure sovereignty.
The Strategic Insight
Value concentrates at platform distribution (L5) and silicon (L1), with foundation models (L4) increasingly commoditized. Cloud (L3) captures margins as the enterprise gateway. Agentic commerce (L6) is the emerging battleground.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
