WSJ What’s News: How China’s AI Power Threatens Silicon Valley
Date: January 18, 2026
Host: Luke Vargas
Guests: Tatya Bolkvadza (Technology Analyst, Oxford Analytica), Josh Chin (Senior Global Correspondent, WSJ, Asia)
Episode Overview
This episode explores the rapid ascent of China’s artificial intelligence sector—highlighting how Chinese AI models, such as Deepseek and Alibaba’s Qwen, are challenging Silicon Valley’s dominance, impacting global markets, and reshaping the geopolitical and economic landscape. Host Luke Vargas is joined by tech analyst Tatya Bolkvadza and WSJ’s Josh Chin to discuss the strategies behind China’s AI growth, its global adoption (especially in the Global South), the resulting pressures on U.S. tech firms, and ongoing competition over technology and chips.
Key Discussion Points and Insights
1. China’s State-Driven AI Strategy
[01:39 – 02:22]
- China’s approach differs from the U.S.: Heavily state-driven with significant government support, particularly since Deepseek’s AI breakthrough in 2025.
- Quote: “China’s AI strategy…is much more state driven.” — Josh Chin [01:39]
- Deepseek’s R1 Model: Nearly as powerful as leading U.S. models but far cheaper, giving confidence to Beijing that China could truly compete.
- Government Support: After Deepseek’s success, a “geyser of government support” was unleashed.
2. Alibaba’s Qwen and China’s Open Source Approach
[02:38 – 03:36]
- Qwen Model’s Success: While less famous in the West, Qwen gained massive global traction after Deepseek, driven by Alibaba’s increased innovation and investment.
- 600 million global downloads; used by companies like Airbnb.
- Became the most downloaded open-source AI model in December 2025.
- Strategic Implications: China’s approach—making models cheap and widely available—is “working for Beijing.”
- Quote: “The success of…these Chinese open source AI models is really showing that the strategy of making models cheap and freely available is working for Beijing.” — Tatya Bolkvadza [03:36]
3. China’s AI Adoption in the Global South
[03:57 – 05:53]
- 5G Comparison: Echoes of Huawei’s global 5G dominance, enabled by affordability and open-source access.
- Quote: “You are certainly starting to see Chinese AI models being adopted around the world because they’re so cheap…” — Josh Chin [03:57]
- Huawei’s Role: Deepseek is the default chatbot on Huawei phones, boosting AI’s reach in Iran, Ethiopia, Niger, etc.
- Geopolitical Strategy: Positioning open-source AI as a tool for democratizing technology; targeting the Global South with partnerships and international conferences.
- Quote: “China is using this as a way to advance its image as the champion of the developing world…” — Tatya Bolkvadza [04:34]
- Xi Jinping’s Statement: At the 2024 G20 summit, Xi argued AI shouldn’t be “a game of rich countries.”
4. Impact on Silicon Valley and Global Competition
[06:44 – 09:55]
- U.S. Pricing Pressure: Free or low-cost Chinese AI models are undercutting U.S. tech firms’ pricing.
- Quote: “Chinese AI models…so low cost, in many cases free, is really exacerbating the really deep fears about the AI bubble that’s been forming in the US tech industry…” — Tatya Bolkvadza [06:56]
- Forced Innovation: U.S. firms must scale up innovation, explore new AI paths (e.g., "world models" for practical applications).
- Divergent AI Philosophies:
- Silicon Valley: Large language models (LLMs) as the path to superintelligence (e.g., Meta, Google).
- China: Leverages industrial integration and data from manufacturing, giving a unique advantage in developing “world models.”
- Quote: “One area where China really does feel like it has an advantage is because it builds so much stuff and already has robots in wired factories making things, collecting data.” — Josh Chin [07:54]
5. World Models and Practical AI
[09:00 – 09:55]
- Sovereign Applications: Growth of AI that can simulate real-world scenarios—valuable for governments and industries.
- Example: Egyptian government modeling the Nile’s response to drought as a “sovereign AI” use case.
- Quote: “Real life public applications are better…the concerns about potential hallucinations are less as well.” — Tatya Bolkvadza [09:00]
- China’s Lead in Autonomous Vehicles: Success in EVs and AVs reaffirms world-model advantage.
6. Structural and Strategic Challenges
[10:30 – 11:57]
- China’s Achilles Heel: Chips
- U.S. controls IP and supply for cutting-edge AI chips; China “as much as a decade behind.”
- Quote: “The biggest challenge for China is chips. This is an area where the US has an immense lead.” — Josh Chin [10:36]
- Huawei is compensating by networking large quantities of less advanced chips (“swarms to beat the titan”).
- Possible Turning Points: If chip innovation plateaus or China devises new architectures, the U.S. advantage may wane.
- Financing Gap: U.S. firms have greater access to private sector funding, further fueling their AI progress.
7. The Policy Wild Card
[11:57 – 12:24]
- U.S. Policy Uncertainty: Recent years have seen shifts in export controls. The Biden administration tightened chip exports; the Trump administration eased some restrictions (allowing certain Nvidia chips with revenue-sharing caveats).
- Quote: “Washington’s policy has been somewhat inconsistent…I think perhaps Washington thinks that this is a way to keep China addicted to U.S. hardware and U.S. software.” — Tatya Bolkvadza [12:24]
8. What to Watch in 2026
[13:10 – 14:03]
- Beijing’s Decisions: How much will China allow its firms to rely on U.S. chips? How much will it push domestic alternatives?
- Quote: “One big question is to what extent Beijing will allow Chinese AI companies to buy these chips…They called [their approach] swarms to beat the titan.” — Josh Chin [13:16]
- Global Ramifications: The next phase of the U.S.-China AI rivalry will likely hinge on chips, funding, and industrial uses for AI.
Notable Quotes & Time Stamps
- “China’s AI strategy…is much more state driven.” — Josh Chin [01:39]
- “The success of…these Chinese open source AI models is really showing that the strategy of making models cheap and freely available is working for Beijing.” — Tatya Bolkvadza [03:36]
- “China is using this as a way to advance its image as the champion of the developing world…” — Tatya Bolkvadza [04:34]
- “Chinese AI models…so low cost, in many cases free…is really exacerbating the…fears about the AI bubble…in the US tech industry…” — Tatya Bolkvadza [06:56]
- “You are certainly starting to see Chinese AI models being adopted around the world because they’re so cheap…” — Josh Chin [03:57]
- “The biggest challenge for China is chips. This is an area where the US has an immense lead.” — Josh Chin [10:36]
- “Washington’s policy has been somewhat inconsistent…I think perhaps Washington thinks that this is a way to keep China addicted to U.S. hardware and U.S. software.” — Tatya Bolkvadza [12:24]
- “One big question is to what extent Beijing will allow Chinese AI companies to buy these chips…They called [their approach] swarms to beat the titan.” — Josh Chin [13:16]
Episode Structure & Timestamps
- [00:00–00:58] Introduction; Background on China’s recent AI advancements (Deepseek) and global industry impact
- [01:39–02:22] China’s state-driven AI vs US model; Deepseek’s significance
- [02:38–03:36] Qwen’s rise; China’s open source strategy; Global adoption
- [03:57–05:53] Huawei’s influence in the Global South; Open source as geopolitical strategy
- [06:44–09:00] Impact on Silicon Valley; Pressure on US firms; Different strategy focuses
- [09:00–09:55] World models; Real-world use cases and China's comparative advantage
- [10:30–11:57] China’s chip dependency; US lead and vulnerabilities
- [11:57–12:24] US export policy and its impact
- [13:10–14:03] Next developments to watch—China’s approach to chip imports and innovation
Engaging Takeaways for Listeners
- China’s government-backed AI strategy is swiftly closing the technological gap with the US and is reshaping global market dynamics by prioritizing affordability and accessibility, especially for the developing world.
- Adoption of Chinese AI—through devices and partnerships—is rapidly spreading in the Global South, reminiscent of past Huawei successes in telecom.
- U.S. tech firms are under growing pricing and innovation pressures, forced to adapt by developing more practical and industry-aligned solutions.
- The global AI race hangs in the balance: China’s key vulnerability remains high-end chip access, while inconsistent Washington policy and rapid Chinese innovation continue to add volatility.
- The next phase will likely be decided by breakthroughs (or bottlenecks) around chip technology, funding sources, and strategic global partnerships.
Conclusion
This episode delivers a clear-eyed overview of how China’s rapid progress and unique approach in AI are reshaping the global tech landscape and raising the stakes for Silicon Valley, global enterprises, and policymakers around the world.