The Chinese Century

First and Foremost you have to accept the Chinese are the greatest manufacturers alive (& probably in human history). It's often said from an elitist position that "the west innovates and the east iterates", in my opinion this vastly undercuts their engineering prowess.

The best engineers know quantity has a quality all to itself. If you want 100 of something build it in America. If you want 100,000 of something build it in Mexico or India. If you want 100,000,000 you must build it in China. Tim Cook said it best with respect to the skill it takes to manufacture at the scale China does (watch the video)

The other thing that should be undeniable is the march of technological progress in China, from:

Cheap labor and textiles in the 80s

Joining the WTO in the 2000s and moving up the assembly chain (electronics & appliances)

Growing heavy industry (steel and aluminum, chemicals, shipbuilding, construction equipment, power generation, ports and high-speed rail, solar panels and wind turbines) after the 2008 global crisis

Pushing up the value chain after the 2015 CCP plan "Made in China 2025" (telecom equipment, drones, solar, batteries, machinery and high-speed rail)

Finally, from ~2021 onwards into advanced manufacturing (Chip Fabrication, Robots, Spaceflight, and AI)

After WW2, the US was ~50% of global manufacturing. In a time of peace, with no major wars, China has ascended to half that Hyperpower status already...

To be explicitly clear: China dominates nearly every manufacturing category in the world and has a plan to conquer any remaining sectors they deem strategically relevant. After pulling roughly 800 million people out of poverty and becoming the world's largest economy (adjust by the cost of living and china dominates), you're being willfully ignorant to imagine they're just going to stop here.

I hate to be the one to break it to you but semiconductors, ai, & aerospace (the last industrial economies where the Western manufacturing base has a lead) are not divinely protected industries, China is coming for them like the rest. In fact it seems to me that their victory is already assured.

Focusing on just Semiconductors & AI for this post:

China has some massive advantages in AI

1. AI has become a technology of scale. Up to ChatGPT's release in 2022, AI was a research technology. One of those things we believe is still divinely protected in the West. As of 2026, that's no longer the case. The winner of AI is going to be whoever figures out how to throw the most compute (power) and data into a single LLM. Taking an existing technology and growing it 1000x is the one thing nobody should be underestimating China's ability to do anymore

2. China has more data. In 2023 the lawsuits finally started flying. Getty started suing image models for training on their library of pictures. The NYT sued OpenAI for the same. etc. As of 2026 the American internet has become more locked down to the labs. Only google can train on YouTube, You have to license data from Reddit, and it seems like there's many more fines to come.

American labs can not just yolo train on the internet like they used to. They now have to train on a much larger base of synthetic data. This works fine enough for solvable problems like code & math (see the recent benchmarks), but I'd argue it's clearly worse for the subjective quality of the models. ChatGPT-4.5 was the best writer ever made, everything since then has been slop. Just ask yourself "if the models are getting so much better, why does their writing seem even more like slop?", it's because they're training on their own slop outputs hyper-optimizing for the use case of code.

None of these problems exist in China. Those labs are free to train on as much of the American Internet as they can efficiently scrape because they simply do not care about copyright infringement. & even more underrated, they can train on the Chinese internet which I struggle to imagine any of the American labs have scaled access to. Combine that with similar techniques around synthetic data & RL, you have models like Kimi K3 that have comparable coding performance and better writing flavor (in my subjective experience)

3. China has more power. GPUs use a lot of co-located power when training models. China has ~4TW of power growing ~16%/yr and America has ~1.3TW of power growing at ~4%/yr. Do the simple math. We're already behind. We're never going to catch up. Nothing in the American political process gives me confidence in either of those two assertions changing.

1. Apple is going to champion CXMT. Apple is not solely to blame for the rise of the Chinese electronics assembly industry, but they have invested over $275 Billion into Chinese manufacturing. The CHIPS act allocated only $52.7 Billion into the American semiconductor industry. Keep in mind how much more efficiently Apple's money is allocated in China compared to US Government spending. If you had to bet on a horse in the memory race, I'd put the entire house down on CXMT.

2. SMIC is catching up to TSMC and Intel. A recent breakdown of the Kirin 9030 (SMIC) by Semi Analysis found the chip had a higher gate density than Intel's 18A node process. This is noteworthy because the Kirin is fabricated with last generation ASML DUV machines and Intel's 18A process uses current generation ASML EUV machines (which have been restricted for sale in China).

Many semiconductor bros will point out the obvious that gate density is not the only relevant measure of a chip's performance. American chips at equal density have more advanced design features leading to greater throughput, power efficiency, and higher yield - but bro, they're catching up to us.

Despite being restricted from accessing leading EUV machines, they're pushing outdated technology to places that were genuinely considered impossible in the past People will rewrite history to say this was always "possible" with older fabs, just uneconomical. From at least my memory, this was straight up believed to be impossible at the time. (fwiw i used to work at AMD, i have a real sense of what was imagined possible vs not).

The Chinese have now taken it to a place where it scales well enough to supply smartphone demand (a lot) And the Chinese seem to have mastered multi-patterning and alignment, it seems reasonable to assume those proprietary techniques will carry forward when they inevitably take the next step forward on lithography. Speaking of that, did you see China has started mass-producing their own DUV machines?

In the face of all the evidence in the world, are you going to doubt how quickly and massively China can ramp up their fabrication capacity? Imagine China never even catches up to EUV lithography (questionable at best imo), it doesn't matter because they'll simply brute force DUV. Maybe these chips will be only 25% as good as leading chips in the west, but if they make 1000x (a reasonable estimate imo) as many chips in the coming decade, the per-chip advantage isn't really going to matter.

3. Open source models will be China's best salesman. Kimi K3 supports two chips right now Nvidia GPUs and Chinese Zhenwu PPUs (similar to TPUs).

From the official Kimi docs

As soon as the Chinese domestic chip supply is ready, it will be safe to assume that Chinese models will be fully co-designed to run on chinese chips. Which means that if you want to run their leading open source models (which the all-in boys have explained why every company will want to do this) you're going to have to build your data centers with the Chinese tech stack.

I believe many countries are going to switch to team China to not be left behind in the AI revolution. Think of it from their perspective. If you're a country like the UAE or France, do you really want to be reliant on the American AI tech stack? After we put export controls on Mythos and Fable overnight? After we make sure the models serve uniquely American interests?

Remember that China LOVES to manufacture and export. They're going to be happy to manufacture and sell you both chips and open source AI. Go ahead and build those data centers! For the sake of their own sovereignty, many countries will be buyers of the Chinese tech stack because they can self host the models. This demand will only continue to fund the Chinese build out. We've seen this before.

So What Are The Trades?

shoutout to myself

What happened to Ford, General Electric, and U.S. Steel is coming for Nvidia, Intel, Amazon, and many other American companies. Trade accordingly