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The U.S. may underestimate China's progress in the application of artificial intelligence (AI), while China tends to underestimate the U.S.'s leadership in foundational AI models, said Wei Zhou, the founding partner of CCV Capital on last Saturday.
He suggested that China may feel it is closer to closing the gap with the U.S., but in reality, the disparity is still significant, especially in the foundational models that power much of AI's future.
Zhou, also the managing partner of KPCB, made the remarks at a panel during the NEX-T Summit 2025 hosted by NextFin.AI and Global Asian Leadership Alliance (GALA) in Silicon Valley. At the panel "VC Trends in AI and Silicon Valley", he joined discussions with Jay Huang, the founding partner of Jadestone Capital; Echo Cheng, the founding partner of BrightWay Future Capital; Lewis Hong, the co-founder and general partner of FP Solutions VC; and Cynthia Zhang, the founder of FutureX Capital.
Hong, also a former SpaceX executive, echoed his view, pointing out that both countries have distinct advantages, which, when combined, create a unique global AI landscape.
In particular, Hong emphasized China's dominance in hardware production. The efficiency of Chinese supply chains, alongside the country's rapid economic growth over the past three decades, has positioned it as a key player in the manufacturing of AI hardware.
On the other hand, Hong underscored the unique position of the U.S. in the AI race, especially in terms of market access and innovation. The U.S. boasts a robust market, critical players, and a wealth of talent, all of which make it an attractive environment for AI entrepreneurs.
Hong noted that physical AI entrepreneurs, in particular, stand to benefit from leveraging the global supply chain strengths provided by countries like China, which creates a unique synergy in the AI ecosystem.
Zhou further discussed the Middle East's strategy to establish an independent AI ecosystem. "We were surprised to realize that Middle Eastern governments have a strong will to create their own AI strategies," Zhou said. "They don't want to rely on China or the U.S., and they are investing heavily in local AI startups." This move, Zhou emphasized, is a significant shift in the region, as countries look to diversify their economies beyond the oil industry and emerge as global leaders in AI and technology infrastructure.
Huang shared his insights on the differences in the AI startup landscapes in both countries. "Over the past decade, I've seen far more hardware-related startups in China than in the U.S.," Huang stated. "In recent years, the U.S. has started to catch up, but China has a head start." He also pointed out that Chinese companies often have a massive cost advantage, with products priced orders of magnitude lower than their U.S. counterparts. Furthermore, the efficiency and production capacity of Chinese startups are significantly higher, enabling them to dominate hardware markets.
In the past, the U.S. was home to many successful B2B software companies, whereas China struggled in this area, Huang noted. He added that while China excels in hardware, it still faces challenges in the software space, especially in B2B sectors.
Cheng discussed the investment dynamics in Silicon Valley, which has seen a record-breaking influx of venture capital this year. "This year, over $100 billion in venture capital has been poured into Silicon Valley, setting a historic high," Cheng shared. However, she pointed out that this concentration of funding has been dominated by just three companies: OpenAI, which raised $40 billion, Anthropic with $27.5 billion, and xAI, which secured $10 billion. This highly concentrated funding model is a departure from traditional diversified investment patterns, and Cheng argued that vertical AI applications—especially those targeting specific industries—hold immense potential for future returns.
Cheng's observations extended to the broader global landscape of AI, with a particular focus on the United States. The U.S. remains the leader in AI, both in terms of capital investment and talent, Cheng explained.
With such massive capital infusions and continuous innovation, the U.S. is pushing further ahead in the race for AI supremacy. However, she also acknowledged the rising ambitions of the Middle East, where governments are investing in AI infrastructure, including chips and data centers, aiming to position themselves as global leaders in the AI cloud capacity market.
Zhang provided eye-opening statistics on China's AI market. "The daily token consumption of Douyin (China's TikTok) now exceeds 1.6 trillion—more than 100 times the consumption of OpenAI," Zhang revealed. "China's digital economy is already valued at over $7 trillion, accounting for 40% of China's GDP, and it employs 70 million digital workers." This massive digital economy provides a fertile ground for AI development, with Zhang emphasizing that China's AI potential—both in terms of talent and capital—remains immense.
Zhang also highlighted that while many Chinese AI talents work overseas in places like Silicon Valley and Singapore, China continues to develop its own AI ecosystem, with major advancements in robotics, hardware, and capital investment.
In the coming years, China will play a significant role in AI innovation, particularly in B2B and B2G applications, Zhang predicted. "I believe over 70% of AI innovation will come from Chinese AI in the near future, making it a huge investment opportunity."
When asked about the most exciting developments in AI beyond generative AI, Cheng emphasized the growing importance of vertical AI in industries like healthcare.
"Vertical AI requires deep industry-specific knowledge and data, and this is where the real breakthroughs are happening," Cheng noted. She cited the success of Subtle Medical, an AI-powered medical imaging company, which has deployed its technology in over 200 U.S. hospitals.
This is a great example of AI's impact on industries where precision and efficiency are critical, Cheng explained.
Cheng also expressed excitement about the intersection of AI and blockchain, stating that despite earlier regulatory challenges, blockchain has rebounded, offering new opportunities to integrate with AI technologies. She pointed out that the energy sector also holds vast potential, as AI innovations will require tremendous amounts of energy to operate, creating new opportunities for energy-efficient technologies.
Zhang also touched on the future of AI hardware, focusing on China's significant edge in this area. "In the U.S., we're seeing a gap in the hardware supply chain, with companies like Huawei and Xiaomi unable to sell their products in the U.S.," she said. "In China, however, there are numerous hardware companies with massive production capabilities, which gives them a clear advantage in the next-generation AI hardware space." Zhang mentioned that her firm has invested in Shenzhen-based companies that are poised to disrupt global markets, particularly in the AI hardware and data-driven sectors.
She also highlighted a promising investment in DIFY, an open-source AI data platform that has gained significant traction. "DIFY is currently number one on GitHub in open-source AI data platforms, and its usage is growing rapidly in Asia, particularly in Japan," Zhang said. "In the future, AI will need to target a vast number of digital agents—potentially up to 50 billion agents, far exceeding the current scale."
