The Chinese AI market is not a single race but a multi-dimensional competition. Three scenarios emerge from the structural dynamics, each with different implications.
Scenario 1: Distribution Dominance Persists (65% Probability)
Big Tech platforms maintain consumer AI dominance through super-app embedding. Model layer continues to commoditize. Platforms go model-agnostic as standard practice. Startups in the squeezed middle consolidate or accept supplier roles. Agentic commerce scales within existing platform ecosystems.
In this world, the AI value chain resembles the mobile internet — platforms capture consumer value, infrastructure captures enterprisevalue, models become commodity suppliers.
DeepSeek’s breakthrough was the first instance of a recurring pattern. R2/V4 deliver another step-function improvement. New frontier labs emerge. Open-weights models become the default. Platform lock-in weakens as capabilities advance faster than integration can entrench.
Paradoxically, even here platforms still win — but they win because their distribution surfaces are model-agnostic by design, absorbing each new frontier model as it appears.
Huawei’s full-stack play succeeds to such a degree that hardware — not models or distribution — determines competitive advantage. Ascend achieves 50%+ share. Government mandates domestic infrastructure. The Ascend ecosystem develops its own standards diverging from CUDA.
Four Decisive Questions
Does DeepSeek R2/V4 deliver another breakthrough? If yes, Scenario 2 gains probability. If incremental, Scenario 1 becomes near-certain.
Does agentic task completion diverge across platforms? Divergence strengthens lock-in; convergence weakens it.
How fast does Huawei’s full-stack play progress? The 2M dies/year target is the key metric.
Does model-agnostic hedging increase? If yes, the model layer has fully commoditized.
Bottom Line
China’s AI economy is not a “model race.” It is a stack-and-distribution game. Platforms win the steady state. DeepSeek wins the resets. The next regime shift is agentic commerce, where capability becomes measurable and distribution advantages can weaken. If you are not at a pole, you are the product.
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.
