Every time the United States government tries to slow China’s rise, it backfires into long-term success for China. In 2019, the US government blacklisted Huawei, with the specific goal of strangling China’s largest tech company. But Huawei came back stronger than ever, by building its own chips, its own operating system, its own AI ecosystem, and today operates in over 170 countries, serving over 3 billion people worldwide.
In 2022, the US government banned the export of Nvidia’s most advanced AI microchips in an effort to hopefully “win” the AI race. But just two years later, Chinese developers shocked Silicon Valley by launching DeepSeek, an advanced language learning model that is open source, was developed for 1/20 the cost of OpenAI, and produced the same quality of results.
And now in 2026, we have the latest Chinese breakthrough that was once again inspired by the US government’s overreaching controls. This is China’s Line Shine Supercomputer, and it just became the world’s fastest supercomputer, overtaking the US for the first time since 2017.
But the real story is not just the speed. It is how China achieved it. Once again China defied the odds, found a way around US sanctions, and built this entire supercomputer using homegrown microchips and exclusive Chinese technology. And China’s new breakthrough could change the entire future of the AI race between the United States and China.
China’s Line Shine achieved a computing speed 20% faster than its American competitor, as Chinese engineers were able to do something we’ve never before seen with a supercomputer. Instead of relying on GPUs, the specialized chips made by companies such as Nvidia and AMD, Line Shine uses CPUs, with specialized circuitry built inside them to perform GPU-style calculations. China’s new supercomputer packs nearly 40 million computing cores into just 90 hardware cabinets, something engineers have never seen before in a supercomputer.
The US government is never going to stop Chinese engineers from inventing. Take a look at this fascinating chart which shows the country of origin of the world’s top 20% of AI researchers. China makes up nearly half of the best AI researchers in the world.
Now you can understand why Jensen Huang wants to sell his Nvidia products to China. He knows the future of AI is being developed in China right now.
But let me show you the exact moment Chinese AI beat American AI. Coinbase, which is one of the largest public crypto companies in the world, just dumped OpenAI and Anthropic and switched to open-weight Chinese models from Zhipu and DeepSeek. The reason for this is incredibly simple. Chinese AI models can perform the exact same computations as their American counterparts but do so at a fraction of the cost.
When Coinbase was using American AI models, their cost for the workload turned out to be $4,811. But running the exact same workload through China’s Zhipu cost the company only $544. What company in the world doesn’t want to pay 1/9th the cost for the exact same level of service? Here’s what CNBC had to say as they broke the news to American investors that the AI bubble will be popping very soon:
Coinbase was the first American company we’ve seen do the simple math and decide to make the move to Chinese AI models, and as this CNBC report details: cheap AI could derail OpenAI and Anthropic’s IPOs, as adoption is already shifting, with Chinese models taking a growing share of enterprise AI traffic.
Here is a stat that is going to blow your mind. 45% of enterprise companies are now spending $100,000 per month on AI, up 20% from last year, and every one of those companies is one quarterly budget review away from dumping American AI platforms.
Honestly, this reminds me a lot of Trump’s failed tariff war with China. Last April, Trump decided to go after the Chinese economy and slap tariffs on Chinese imports that, at their peak, reached an incredible 145%. Trump’s thinking was too simple. He thought that if he could tariff Chinese imports at this extremely high rate, it would force American companies to abandon Chinese manufacturing and reshore their factories to the United States.
In theory, this would create a manufacturing boom in the US and millions of new jobs could be added to the US economy, but this only worked on paper. In the real world, US companies like Apple and Nike have spent decades building dedicated supply chains throughout China, and there is no way US companies could afford to reshore their factories and still remain profitable. Eventually Trump gave up his tariff war on China and quietly retreated, never admitting defeat, but also never achieving anything with his failed tariff war.
Now the same logic is applying to the AI industry. As I mentioned before, the US government banned American AI chips, restricted model weights, blacklisted Alibaba and Baidu as Chinese military companies, and just last month banned Anthropic’s flagship model from every foreign national on the planet.
But Chinese labs responded by building cheaper, more efficient models and priced them at one ninth the cost of the American alternative. Anthropic confidentially filed for an IPO targeting October at a $965 billion valuation. OpenAI followed days later with its own confidential filing.
But here is the problem. Both companies built their financial models on the assumption that they could keep charging enterprise prices that are 9 to 33x what Chinese competitors charge for the same task. There is no chance this is going to work out long term, and these American AI companies will now have to reduce their pricing to compete with the Chinese AI platforms. In fact, here’s what Anthropic’s CEO told US lawmakers this week:
Let me translate that message into simple English. Anthropic’s CEO is essentially asking the US government to ban his competitors and target China’s open-source models. But as I’ve proved with numerous examples, every time the US goes down this path of trying to ban competition, it ends in complete failure and will ultimately backfire. For some perspective on this, here’s a quote from Futurist Daniel Jefferies that perfectly describes the situation between the US and China:
The United States better wake up and start planning on how to compete with the Chinese, because President Xi has made it very clear the path that China will follow in the future. Bloomberg reported this week that China will now push all school levels to teach AI in a new tech drive coming directly from China’s President.
Earlier this week China announced a new five-year blueprint that will make AI a core capability for every Chinese student across every grade level, and this is a huge deal, because one thing we’ve seen China do very successfully over its history is launch concrete five-year plans and achieve significant success.
In fact, if we look at the Chinese economy and its share of the world’s GDP over the past 25 years, look at the significant growth China has achieved while the United States has been declining every year since 2000. In fact, India, one of the fastest growing economies in the world, remains the competitor most likely to challenge America’s status as the world’s number two power.
The future of our global economy is China, as the world outside the US is increasingly driving Chinese electric vehicles, scrolling the web on Chinese smartphones, and powering their homes with Chinese solar panels. But China is also going to become the number one provider of AI models for US companies. Just look at how some of the biggest companies in the world have already begun the transition.
I’ve already mentioned the big shift from Coinbase, but how about Shopify moving over to Alibaba’s Qwen AI platform? Airbnb and Uber Eats also followed the same path, along with Germany’s Siemens and even Microsoft, one of the staples of American tech, is now testing China’s DeepSeek V4, which was released in April.
Once again, here are the insights from one of America’s AI CEOs. This is Alex Svanevik, who runs Nansen AI:
And to give you an insight into how China is changing the future of AI, here’s a report from Shanghai Eye, which shows China is not only developing the world’s best AI models, but also shipping processed tokens overseas via undersea cables. This is an absolute gamechanger:
Wow, in one year China’s token demand went from 1 trillion to 100 trillion, and trust me, this is just the beginning of China’s domination of the AI industry.
China is inventing the future, and doing so in a way that simply can’t be ignored any longer. In the future, China will be able to offer the world cheaper, faster, more efficient AI models, and it doesn’t take a genius to understand that consumers will always choose the best price available. Watch the full video breakdown of today’s newsletter below 
