China's tech giants are currently competitive in the field of artificial intelligence (AI), but their position may not be sustainable for long. This aligns with Washington's desired outcome. Pony Ma, the co-founder and CEO of Tencent, stated that his company is not far behind Western counterparts, despite the United States' efforts to restrict China's access to high-tech semiconductors, equipment, and software. China has made significant progress in generative AI, with over 130 large language models, accounting for 40% of the global total. Baidu claims that its Ernie 4. 0 is comparable to OpenAI's GPT-4, while Alibaba boasts its Tongyi Qianwen 2. 0 as one of the world's most powerful AI models. One reason for China's progress is their foresight in stockpiling AI chips before US restrictions tightened. Chinese firms, like Baidu and Tencent, have significant reserves of AI chips, enabling them to continue model development for multiple generations. Chinese companies have also resorted to workarounds, such as clustering less powerful chips to train AI models and repurposing gaming graphic cards. They have also developed algorithms to optimize computing power.

However, technological advancements are rapid, with Nvidia set to release its next-generation H200 GPU in the second quarter of this year, rendering the current Chinese stockpile outdated. This highlights the urgency for China to find domestic alternatives. While Huawei's AI processors match Nvidia's in computing power, they fall short in performance. Even if Huawei develops a more advanced product, contract chipmakers like TSMC and Samsung Electronics may be restricted from manufacturing them, and domestic manufacturers lack the necessary equipment and tools. The gap between China and the West's AI capabilities will become more apparent. Tencent is said to be catching up in AI development, according to Reuters. However, the views expressed in this article are those of the author and do not necessarily reflect those of Reuters News, which upholds the Trust Principles of integrity, independence, and freedom from bias. Robyn Mak, the author of this article, has been with Reuters Breakingviews since 2013 and has a background in international relations and economics.