Everyday AI Podcast – An AI and ChatGPT Podcast - Ep 823: The U.S. vs China AI Cold War Is Starting: What It Means and How It Impacts You

Episode Date: July 21, 2026

A U.S. vs China AI cold war is starting, and most business leaders have no idea they're already in it.China's open models just closed the gap with America's best, oftentimes at a fraction of the price.Now both governments are moving to wall off their AI within days of each other.Why? Because this was never about benchmarks. It's about power y'all. We break it all down on today's show and help you figure out the 101 of the AI war between U.S. and China. The U.S. vs China AI Cold War Is Starting: What It Means and How It Impacts You -- An Everyday AI Chat with Jordan WilsonNewsletter: Sign up for our free daily newsletterMore on this Episode: Episode PageToday's Episode on LinkedIn: Thoughts on this? Join the convo on LinkedIn and connect with other AI leaders.Upcoming Episodes: Check out the upcoming Everyday AI Livestream lineupWebsite: YourEverydayAI.comEmail The Show: [e-mail] with Jordan on LinkedInTopics Covered in This Episode:U.S.-China AI Cold War OverviewChinese AI Models Closing U.S. GapGovernment Restrictions on AI Model AccessEconomic and Geopolitical AI Power StruggleRisks for U.S. Businesses Using Chinese AIOpen Source vs. Closed Source AI DebateChinese AI Model Pricing Undercuts U.S.AI Model Distillation and U.S. Security ConcernsEnterprise AI Cost-Effectiveness BenchmarksMicrosoft Testing Chinese AI DeploymentsFuture AI Model Export Controls & StrategiesRecommendations for AI Model Sourcing and RiskTimestamps:00:00 US-China AI tensions escalate04:30 Switching to Chinese AI models08:47 US vs China in open source models11:39 China's narrative control efforts14:42 Challenges in AI model development18:25 Differentiating open source strategies23:04 AI model cost-effectiveness analysis26:31 US measures against model distillation29:38 Discussing Microsoft's use of AI models31:17 Controlling export of AI modelsKeywords: US vs China AI cold war, China AI restrictions, US AI restrictions, AI model export controls, Chinese open source AI models, AI geopolitical power, economic growth through AI, global AI standards, AI superpower race, AI model benchmarks, open weight models, enterprise AI deployment, trillion parameter AI models, Microsoft AI model testing, AI model pricing, Claude Fable 5, GPT-5.6, GLM 5.2, Kimmi K3, Alibaba Qwen 3.8, model distillation, AI cybersecurity risks, AGI leadership, military AI use cases, China narrative control, model adoption, compute power for AI, AI training data, AI export law, US national security and AI, model routing, mixture of models, cost per intelligence index, Anthropic models, cost per task AI, model capability parity, AI market adoption, cloud competition, AI architecture innovation, AI model sanctionsSend Everyday AI and Jordan a text message. (We can't reply back unless you leave contact info) Ready for ROI on GenAI? Go to youreverydayai.com/partner 

This is the Everyday AI Show, the everyday podcast where we simplify AI and bring its power to your fingertips. Listen daily for practical advice to boost your career, business, and everyday life. A US-first China AI Cold War is starting and most business leaders have no idea. They may already be participants. And it's moving much faster than hardly anyone can keep up with. About two weeks ago, Reuters reported that China is considering locking down its most advanced AI models, keeping its best from the rest of the world. Then, just yesterday, the Trump administration is signaling it may restrict Chinese AI models inside the United States. Yeah, read that again, because both sides are now moving to wall off AI access within days of each other.

And here's why two governments suddenly care so much. much about who runs which model. Well, that's because this was never really about who has the most powerful AI or who has the best benchmarks. It's actually about economic growth, geopolitical power, and who sets the standards the rest of the world builds on. That's because whoever leads AI doesn't just win a tech raise towards superintelligence, they gain leverage over every other country's future. And that's the fight your business, now be caught in the middle of whether you signed up for it or not. So let's dig in.

Here is the big picture. The AI power is flipping right in front of our very eyes. That's because for three plus years, the U.S. has been pretty far ahead, at least when it came to the open source Chinese models. But now China is actually closing the gap with open weight models. Yeah. Closing the gap. gap between the best that Anthropic and Open AI have to offer. But now both governments are

treating their frontier models as strategic weapons worth potentially restricting. And U.S. businesses that have been chasing models and maybe using these open source Chinese models because they were very capable now might accidentally inherit some serious geopolitical deployment risk. So on today's show, you'll learn how these Chinese models became cheaper, closer, and harder to ignore. You're going to know why a trillion parameter, yes, trillion with a T, a trillion parameter open model no longer means that you can simply run it on your computer. You're going to know why Microsoft testing Chinese models could signal the enterprise AI future. And you're going to know what leaders should deploy, document, and avoid before restrictions may harden.

All right, let's get into it. Welcome to Everyday AI. My name's Jordan Wilson, and we do this every day, and it's yours. This is your unedited, unscripted, daily, live stream podcast, and free deal in the newsletter, helping business leaders like you and me keep sense of all of these developments because, yeah, they're happening at warp speed. I tell you what matters, what doesn't? You take that information, and you're the smartest person in AI at your company.

So it starts here with the podcast, but make sure to go to our website at your EverydayAI.com. we're going to be recapping the highlights from today's show and a whole lot more. Let's get straight into it. What the heck has happened? I mean, my gosh, as someone that's been doing this everyday AI thing for three and a half years, the last like five or six weeks, at least when it comes to the U.S. versus China tensions and even what each country is pushing out, aside from just AI acceleration is that, at an all-time high. The battle between these two nations couldn't be any higher.

So like I said, in the past two weeks, we saw reports first that Beijing is looking at curbing oversee access to its top AI models. And then we got a report just yesterday saying the Trump administration may also ban Chinese AI models. And that's big news. That's because we've seen a lot of reports. I've talked to people personally that are moving entire enterprises off, you know, maybe like an open AI or entropic or Google models, right, and on to other Chinese models. I think especially when we saw GLM 5.2 from ZAI, which was technically a more affordable,

you know, version of some of the frontier models. It wasn't quite yet punching at the state of the art. art kind of AI class, but it was getting close. That's where it kind of started, but it's really snowballed just the past week with models like Kimmy K3, which is now just under the Fable 5 and GPT56 sole class. And then Quinn, their new 3.8 model, which we don't have full benchmarks on yet, but it's released, which is weird, right? Normally, companies don't release models and not release benchmarks, but it's live and it's

seemingly really good. And it also may be entering that top tier. So in that upper echelon now, we might have models from Anthropic, Open AI in two open weight Chinese companies. So in theory, these are models, right? Again, you can't really run them on your computer. But these are models that large, large enterprises that have the means to do it, they can run all of these things locally. Again, assuming they have a couple servers to throw on.

So here's why AI leadership now decides the global superpower status. It's three things, right? It's the economy, power, and this multi-access. Okay. So here's what each of those boils down to whoever automates thinking work fastest compounds growth over every rival nation and that helps whoever is actually winning AI have a leg up on the economy power I mean aside from you know these systems these AI systems because that's what there are they're much more than models right they're being used in military use cases and I've been talking about this since the very beginning right before we had models that should have even been touching the battlefield. I've said the future of AI is definitely it is going to become the new oil.

It is going to become the new gold. And I think that most people that hang out on the bleeding edge understand that to be true. Maybe the rest of the world is, we'll see that in a year or two. But that is the reality. If you control AI, if you control, you know, if you are in the lead toward AGI or artificial superintelligence, That means that your country will wield a or yield a power over every other country. And there may not be much that anyone can do about it. I mean, when you think about things like being able to, you know, put cyber attacks and being

able to, in theory, take down entire country's power grids, their banking systems, right? That's what we're at. It's things that physical weapons, you know, would try to do, right? But this is something that could, in theory, be launched autonomously. at scale. That's the down and the ugly side of AI, but that's ultimately anything as powerful as artificial intelligence in these models that we have now. You have to think it's much more about, you know, it's about much more than helping us all write better emails or helping us triage our days better. There is a bigger and sometimes batter purpose behind what nations,

especially the nations jostling for power at the top of the global. pyramid, this is what they want it for. And then last but not least, it is this, this parody. There is this, uh, parody that's happening right now because right now, no nation leads in every access, right? When it comes to model capability, uh, available compute, costs, adoption and deployment, uh, right? And I think that's one of the things that, uh, China is really working on. And just FYI, as I'm talking about this, I'm obviously right.

Um, I'm based in the U.S. Most of the people and companies I work with are base in the U.S. So I'm obviously coming at it from that perspective, if you couldn't tell already. So one of the biggest questions is like, why? Why does China have they been coming with this open source or open weight approach? And the U.S. just really hasn't. Well, first, you know, some recent models from the U.S. have done fairly okay on the open source scheme.

So thinking machines labs, new inkling model really good. You know, NVIDIA's open models fairly good. But no one's been able to touch the Chinese models. Part of that is because of distillation, which we'll get to. But it always gets to why would people always ask, why would China put out these open source models that, you know, at least six months ago, you know, you could download them on very powerful consumer hardware and run them. And everyone was always confused.

And I think that there's a couple of reasons. But one, China wants to be the default on what the rest of the world builds on. Because if so, that makes all the other services that you might need to run those models more valuable. And every enterprise, here's the thing, it is a competition. Every enterprise that switches from U.S. models drains the revenue funding essentially Silicon Valley's next training runs. So if you take the fuel out of the car, the car can. no longer run. Also, huge models make enterprises rent Chinese compatible hosting tools and support. And then China gains adoption and they weaken U.S.'s pricing power and they keep the leverage.

The other thing that most people don't talk about is controlling the narrative, something that China is obviously very concerned about and has been concerned about for many decades. But these Chinese models, right, studies have shown that they avoid sensitive topics, that Beijing does not want to discuss globally. So people are just sometimes copying and pasting, whatever an AI model spits out and they're maybe sending it to colleagues, they're sending it to clients, or in many cases, they're just putting it on the internet.

Right. And then large language models start to regurgitate this and this becomes part of the training data. So this is a way and this gets, you know, put out in schools, media, government, documents, everything. So, and you also have people using these models to distill and create other models, right? As an example, I believe cursors, Kimmy, I believe cursors models, their first ones that were based off of Kimmy's open source models. So why does that matter?

Why does China want to control the narrative? Well, a Stanford study even found that China origin models answered political questions less directly. So it's not like, you know, these models are going to say something that, you know, overtly slams the U.S. or overtly, you know, puts, you know, Chinese, you know, morals and ethics on a pedestal. That's not what I'm saying. But it's just the nuance. It's the, you know, describing things in a slightly different way. And, you know, if you think of the game of telephone, right, each time that happens, you know, each time someone just blindly copies and pages and paste. something on the internet and then the next round of frontier models get trained on that information and it just starts to weaken and distill maybe certain talking points that Beijing would rather not be out there. So it's much more than just about controlling the, you know, what the rest of the world builds on and, you know, maybe sucking the U.S.'s power supply dry. It's also about controlling the narrative. All right. So let's talk about some of the more recent models.

So I think this all started earlier this summer or late spring with ZAI's GLM 5.2. So that is not nearly on the same tier as the most recent ones from this past week. And that's Moonshots Kimmy K3 and Alibaba's Alibaba's Quinn 3.8 max. And they essentially on some things undercut US pricing, especially GLM 5.2. And in many cases, they have been good enough, right? We've literally read stories where, you know, I would say more tech forward or AI-native companies, but large ones essentially took their clod spend, right? Because anteprofix models are the most expensive. And there was a period, right, where Anthropics Mythos 5, Fable 5 came out before OpenAI released their competing model in GPD 5.6.

So there was this time and period where Anthropic had a lead in the quote unquote model wars, but it was just redonculously expensive. And everyone's like, wait, we could use a model like GLM 52, which isn't that far behind their opus class model. And we could get like 95% of the power of like an opus model for a fraction of the cost. So they were just saying they're trying to undercut U.S. pricing with good enough models, not necessarily by being the number one model in the world. And that's kind of where we stand now. And I said this on a show earlier.

I think previously Chinese models were like six months behind. Now it's like one to two months. Part of that is I think their distillation efforts and their architecture under, right? It's not just distillation. Obviously, these labs. have some of the most talented engineers in the world. So it's a combination, I think, of, you know, number one, their distillation efforts have increased.

Number two, some of their architecture that they're putting out is truly good and novel and making a difference. And, well, number three, which you can't overlook, is the recent kind of U.S. sanctions that had been handed down largely because of anthropic to all model providers here in the U.S., which is delaying. We've seen reports maybe like a 30 day, 45 day or more, whereas these companies would have been pushing these models out to the public a little faster. But now that we live in permission slip AI land,

you know, it's the combination of those three things that have kind of closed this gap that was much wider before. But it's the benchmarks. We do have to talk about the benchmarks. All right. So if we look at the artificial analysis index, which we talk about, sorry,

the artificial analysis intelligence index, which we do talk about a lot on this show, you know, now all of a sudden you have Kimmy K3 in this same tier, right, almost as Claude Fable 5 and GPD 5.6 sole. So on this benchmark, which is probably the best single overall benchmarks because it is a conglomerate, right? Claude Fable 5 has a 60, GPD 5.6 sole has a 59. And, Kimmy K3 has a 57, right? And there is usually always like at least a 10% drop off, right? In terms of the AA index, now it's like a 5% drop off, right? Which is not that big of a drop.

So here's though where it's changed, especially the past like a couple of models with ZAI's LM 5.2. This is something that, yeah, you could run a slowdown, a watered down version of that model if you had a super powerful consumer PC, right? Or you couldn't actually run it at full speed, nothing like you could run online. But people out there that spend maybe way too much money on their consumer setups, they were able to run essentially wateredown versions of GLM 5.2. Not anymore, right? because now it seems like the next step that China is taking, they want to compete on the frontier, the frontier frontier.

And as the U.S. models, the state of the air models, get more and more capable, well, it gets harder for, you know, a small enough model to close that gap. Because now what we're seeing is these multiple trillion parameter models. So open source, right, especially through 2025, generally meant, okay, you could get a quant version of this model, right, which, you know, only activates certain parameters. So think about two, you know, for context, right, the, the GPD4 family of models was like two trillion parameters. So now you have open source models that are bigger than that, right? which is crazy.

So these multiple trillion parameters, you can't run them. You literally need a small data center. Or like I said, if you are an enterprise company that has access to compute, yeah, you're going to need a whole rack of a video GPUs to actually run these things. So this does even change, I think, how most enterprise leaders should be viewing open source. It's almost like you should be saying, like, what kind? Like consumer open source or enterprise open source? because there really wasn't that distinction.

There really wasn't that, you know, multiple tiers, you know, because if someone chained together a couple Mac studios a year ago, you could probably run a quant version of these, you know, Chinese open source models. But are you still running in circles trying to figure out how to actually grow your business with AI? Maybe your company has been tinkering with large language models for a year or more, but can't really get traction to find ROI on Gen. A.I.

Hey, this is Jordan Wilson, host of this very podcast. Companies like Adobe, Microsoft, and Invidia have partnered with us because they trust our expertise in educating the masses around generative AI to get ahead. And some of the most innovative companies in the country hire us to help with their AI strategy and to train hundreds of their employees on how to use Gen AI. So whether you're looking for chat GPT training for thousands or just need help building your front end AI strategy, you can partner with us too, just like some of the biggest companies in the world do. Go to your everyday AI.com slash partner to get in contact

with our team, or you can just click on the partner section of our website. We'll help you stop running in those AI circles and help get your team ahead and build a straight path to ROI on Gen AI. They're not exactly cheap anymore either. So with that to distinction or moving away, means they're not exactly cheap. And so for me, when I'm looking, right, if I'm a business leader, well, I am, right, but I'm not necessarily making enterprise decisions at Fortune 500 companies, although I do advise those type of companies. Before, even two, three months ago, you say, yeah, look at open source models as an alternative.

Today, I don't really know why people should. And maybe that's largely because of what Open AI has been able to do. In terms of cost per intelligence index, right, which I think is just as important as the overall intelligence from artificial analysis. But this essentially says, how much are you paying to get these tasks done? Right. Because all of these benchmarks, artificial analysis runs it. And they say, here's how much it actually costs to get all of this work done. And what we've seen is, well, Anthropics models, this is not one where you want to have a big lead.

You want to have a bigger bar chart. No, that's bad, right? Anthropics models are ridiculously expensive. So as an example, it costs $2.75 per task, whereas Open AI's models are much cheaper, up to a third cheaper. So their smaller version, GPD-56 terra, is 82 cents. And what's interesting here is actually the Chinese models Kimmy K3 and Quinn 3.7 actually cost more than GVD56 terra and the Quinn costs more than the mid tier.

Oh, sorry, I don't have this one on the benchmark here. But it, right, when you have. leading state of the art model. And it's costing about the same or even less than the open source model. So it's like, okay, maybe there's a couple hundred companies in the U.S. that can actually go out and run this themselves without paying API prices. Because if you are paying API prices, at this point, you would probably just should be using open AI.

Because when it comes to price per task, which is what is ultimately going to matter, they're winning, right? or maybe you are looking at Grock and MetaMew Spark, right? You remember on the show last week, I said it was a really bad week for Anthropic with all of these new open source models coming out, but then also with GROC and Metamuse Spark 1.1, coming with some pretty good models that people weren't expecting, especially on the coding and software engineering side.

But similarly, artificial analysis has this, this quadrant when it's cost per tax cost per task and the essentially intelligence or the artificial intelligence artificial analysis intelligence index score so essentially you want to be in the upper left hand corner which means you have the smartest model at the cheapest cost and none of the chinese open source models are in that quadrant anymore that obviously it resets as new models come out and the medians and the averages all change. But right now, the three companies in there are Open AI, GROC, and meta. No open source Chinese models where this is actually a quadrant that they used to dominate, which is why I think six months in a year ago, it made a lot of sense

for business leaders to be looking at Chinese open source models, especially when they were a little bit more tameable in terms of what you can do without having a multi-million dollar, you know, compute setup. But it's just not the case anymore. So for me anyways, even though I know that the war is going to age on, if I'm making decisions, I'm looking at these charts and saying, well, there's maybe not that big of a reason for us to look at these models unless you do want or need that open nature, which I know some companies obviously do. But it's no longer just the cheap API prices that reveal the true cost of using these models, right? Because you have these aggressive Chinese prices that shows their strategy is not just competing for money, right?

Because there's other subsidies, cloud cross-selling competition, and also still these lower prices forced enterprises to question the expensive closed model defaults. So I know that the models from the past week, right, specifically Kimmy K3 and Quinn 3.8, they may not still fit in the traditional open source cheap Chinese models to use paradigm. But there are still those models. They will still continue to be developed. And I think that there will be a place for them. But it comes to distillation. We can't get to, you know, 20 plus minutes and not talk about distillation.

So distillation is essentially, where for the most part, Chinese companies, you know, take. It's just like they copy the questions and they copy the answers for a lack of a better term from the big AI model provider. So it's just like they copy the answers on the test. They take all the hard work from the American companies and use it to train their own models. Right. And that accelerates the progress.

But you still can't explain, you know, how they get there. Just through distillation, that's not enough. because they have had some great advancements, the Chinese companies, in architecture, and just their overall execution. So AI model distillation isn't universally illegal. It's highly frowned upon, and it is, you know, sparking some backlash politically and economically with export controls. I think we're going to continue to see those ramped up now here for the rest of 2026. But, you know, these alleged Chinese practices do violate contracts and have led to major U.S. national security actions. So what is the U.S. doing to stop this model distillation? Well, they're trying to cluster traffic and, you know, detect and, you know, catch large-scale offenders and, you know, block them.

But it's pretty hard because they're just playing whackamol. A U.S. House committee did, though, just unanimously. back a bill to sanction foreign actors for extracting U.S. models. But laws in the U.S. are a slow-moving machine, right? So it could be many months or multiple quarters or even more than a year before something like that ever becomes law. But these published open weights cannot be recalled. So businesses can still adapt them anyways, right? So when models go open source or open weight. It's kind of like the cats out of the bag at that point. So the U.S. can try to restrict access, but that could potentially backfire because Washington can, yeah, they can pressure,

you know, via export controls or otherwise the chips, the cloud access, procurement, sanctions, and all these other things. But the restrictions may just protect the technology while raising the cost for American companies. Like I said, if you are restricting these models, but companies already have the weights, you may just be keeping money ultimately from other ecosystems that could power the American enterprise, right? So I think the writing, though, is kind of on the wall.

And I think it's actually Microsoft's, some of their recent actions that show, I think, what we might be looking at when it comes to how should large enterprises be looking at or using these Chinese models? So reportedly, Microsoft was evaluating DeepSeek for cheaper co-pilot, co-work model routing. So not for all of Microsoft co-pilot, right? And this is just according to reports. I don't believe Microsoft has confirmed anything yet.

And they were looking at this for a backup because what they found Microsoft that the co-pilot co-work was actually very cost intensive. And they did start to bill it, you know, at a token rate and no longer just including usage like they did when it was in beta. So that is telling you everything that you need to know. They haven't switched to it. But Microsoft, yes, that Microsoft, the one that has huge stakes in Open AI and Anthropic, they are looking at a model like, Deep Seek. For all the, you know, the time that Deep Seek's name has gotten dragged through the mud for, you know, some alleged shady practices, they're still looking at them to use them. And I think ultimately, you have to look at your balance sheet. You have to look at the dollars and the sense and make it make sense. And in this case, Microsoft, right? And the other thing, again, if you're a large company and you can, you know, essentially download, the weights to these models and you can fine tune them and make sure that they perform up to a certain standard. But I think the future workloads, like in this Microsoft example, could just be

routed by cost, capability, security, geography, and regulation, right? I've been a huge advocate over the years for, who knows, maybe we'll get there eventually, but, you know, the mixture of models, much different than a mixture of experts, right? That's using a single model. And then the model kind of calls on the different experts and the different parameters in this dense model, right? Mixer of models is similar to model routing, but it's just using right. I think perplexities model council

Microsoft has something similar, but it's well, when you put a prompt out there and there's just a router and it might send a simple prompt to one open source model, right? That's a good example. Or it might send a complex prompt to 100 different models and then an orchestrator model to go in

and collect all the information. and maybe half of those 100 models are open source. But I think, if anything, the shift, though, does weaken loyalty to one model and rewards flexible architecture. I do think that is probably the future where enterprise leaders need to be focusing on. So as we wrap up, let's talk about that. What is coming next and what business leaders should be doing now? Well, I would do this.

I'm going to say expect controlled openness. All right, whether it is China placing export on their open models, which I know kind of goes against the very reason they put them out there in the first place, but that's another topic for another episode. But I would expect controlled openness. So either China is going to restrict probably the U.S. from using their maybe most frontier models. and or the U.S. may also restrict the usage of some of these Chinese open models as well, especially as now these models are getting more and more capable, more and more autonomous. And when it comes to cyber, things are getting a little bit scary-ish, right? I think in six months a year, that's when things are going to be getting real scary.

in terms of these autonomous models as they can technically get smaller, faster, more capable, and, well, more open source, that's when these exports are going to, or these export controls are going to come in. So expect both nations to probably just share older models, but maybe guard their best. But what you need to do is inventory where your current Chinese open source models are running and then route those tasks by cost, security, and policy risk. And then you need to document your sourcing and be ready to swap out a model or to, you know, go to your plan B when and if those government restrictions harden.

All right, I hope this episode was helpful. But like I said, whether you know it or not, there's a good chance if you're using open source models that part of your plan might need to be modified pretty. soon because the war between the U.S. and China when it comes to AI is heating up. So I would expect a lot of back and forth racket. So don't get stuck in the middle. Don't waste hours every single day, toiling over it. Just tune in to us here on the show and the newsletter at your everydayaI.com because

we're always going to keep you up to date. I hope this one was helpful. Thank you for tuning in. Hope to see back tomorrow and every day for more everyday AI. Thanks y'all. And that's a wrap for today's edition of Everyday AI. Thanks for joining us. If you enjoyed this episode, please subscribe and leave us a rating.

It helps keep us going. For a little more AI magic, visit Your EverydayAI.com and sign up to our daily newsletter so you don't get left behind. Go break some barriers and we'll see you next time.