U.S.–China AI Competition and Investment Opportunities

1. Background & Core Thesis

• Since 2021, U.S. AI stocks like Nvidia and Palantir have surged 10× and 4× respectively, rewarding early investors.

• Today, U.S. AI equities are already overpriced, making it difficult to enter at this stage.

• The next unexplored opportunity lies in China—especially after China’s State Council issued the “AI+ Action Insights” policy in August 2024.

• This initiative could drive a wave larger than “Internet+,” positioning China as the next global AI growth engine.

2. Macro Cycles: Kondratieff Wave & New Engine

• The Kondratieff cycle suggests the global economy goes through 50–60 year waves: boom → recession → depression → recovery.

• The last wave was driven by the Information Age (PCs, internet, mobile), which is now exhausted.

• The new engine is Artificial Intelligence (AI) — the first technology to extend human intelligence, not just physical strength or information access.

• We are at a rare historical inflection: the old engine is ending, but AI is starting a new cycle, bringing both chaos and unprecedented opportunity.

3. U.S. vs. China in AI

• U.S. Strengths:

  • Cutting-edge AI chip design and manufacturing (Nvidia).

  • Comparable to owning the world’s fastest “engine” in an F1 race.

• China’s Advantages:

  • The world’s largest market and richest application scenarios (payments, e-commerce, ride-hailing, short video).

  • Massive data volume (fuel for AI).

  • Strong state-driven industrial support (R&D investment, subsidies, SOE adoption).

  • U.S. sanctions accelerate China’s push for domestic alternatives like Cambrian (“China’s Nvidia”).

4. The Four AI Investment Waves

1. Hardware Wave – High Risk / High Reward

   • AI chips and related infrastructure: Cambrian, Huawei, YMTC, etc.

   • Valuations are high, products may still be immature.

2. Software Wave – Relatively Stable

   • Large language models (LLMs) and AI platforms.

   • Chinese LLMs have a natural advantage in language, culture, and business context.

3. Application Wave – Greatest Potential

   • AI applied in traditional industries (manufacturing QC, medical diagnosis, drug development).

   • Companies like WuXi AppTec and WuXi Biologics are integrating AI to accelerate R&D.

   • Often undervalued despite transformative potential.

4. Energy/Power Wave – Highest Certainty

   • AI model training requires massive electricity.

   • China leads the world in clean energy capacity (solar, wind, hydro).

   • This creates a highly certain, long-term growth market.

5. Investment Implications

• Logic: Don’t just chase the hottest AI names. Look for overlooked “hidden gold mines” the market underestimates.

• Risk Management: Bubbles are inevitable; the key is identifying value before they burst.

• Key Advice:

  • Diversify across the four waves depending on risk appetite.

  • Focus on company fundamentals, industry prospects, and management execution.

  • Avoid the two biggest risks: ignorance (not seeing the trend) and inaction (failing to act despite knowing).

6. Conclusion

• U.S.–China rivalry in AI is intensifying: U.S. leads in chips, but China has unmatched data scale, policy support, and application depth.

• Investing in China’s AI ecosystem could represent the largest wealth opportunity of the next decade.

• Every major technological revolution reshuffles wealth distribution—success depends on being prepared and bold enough to seize the wave.