How Nvidia, Huang fit into US-China AI race | Number Theory

The concluding part brings in the geopolitical in the economic AI story, largely the Sino-US competition

The first part of this series discussed Nvidia’s rise as one of the most valuable companies in the world and how it matters for the larger AI economic story. The concluding part will bring in the geopolitical in the economic AI story, largely the Sino-US competition.

Bloomberg

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  China has won the trade war, can it also win the AI war?

  2026 will be the second consecutive year when China will post a trade surplus above a trillion dollars. This kind of mercantile dominance is unprecedented in the world. China today, is not just the cheap factory of the world, like it was a few decades back. It controls some of the most cutting-edge technology and manufacturing processes in the world, so much so that even European and American giants in many sectors are now lagging. Even on AI, as was shown in an HT analysis of a Carnegie China report, China is catching up pretty fast with the US in terms of the skilled workforce in the sector. The world realised this even before the Carnegie China report came, when China released DeepSeek-R1– an open-source reasoning model – in January 2025, bringing it within striking distance of all leading frontier AI developers, all of whom are based in the US. A recently published report by Lowy Institute also shows that Chinese models are catching up fast with American models despite the US having a lead over China in every AI field except human resource.
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  But China still needs advanced chips for its AI push

  Jensen Huang has been seen as a villain by many US hawks because he has also been a votary of the relaxing restrictions on sale of Nvidia chips to China. The latest controversy around his extra-marital affair and the allegations of Alice Huang being an alleged Chinese spy have only added to the hawkish views around Huang. China, on expected lines, has downplayed the controversy and denied the allegations of any kind of spying. While a lot of commentators argue that China does not really need Nvidia’s chips – the actual evidence is anything but clear – an HT analysis of trade data shows that unlike in most things, China does show a rising import dependence in commodities which are likely GPUs or related products. This is where Nvidia, both in terms of its chip supplies and technical know-how in terms of any alleged corporate espionage via Huang himself being compromised, becomes important.
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  The AI-race as of now is contingent on the US and China solving their respective supply constraints first

  The easiest way to describe the US and China trying to derail or constrain each other’s progress in the AI race is the US trying to restrict China’s access to cutting edge chips/GPUs and China limiting the supply of rare earth minerals to the US. Both sides perhaps know that the constraints will cease to matter in the long-term but they hope to crack the challenge before they become redundant. “Washington has imposed numerous restrictions on both China and Chinese subsidiaries abroad, which has, in turn, spurred affected companies to innovate around them. In May 2026, Huawei announced a new chip-design approach intended to increase transistor density without shrinking transistors. This could allow it to design chips by 2031 with transistor density equivalent to that of the chips Taiwan’s TSMC aims to make in 2028, but without the advanced lithography machines China is barred from importing. If successful, this could limit the effect of US export controls”, the Lowy Institute report says. The US, on the other hand, launched the Pax Silica alliance in December 2025 which will ease its access to rare earth minerals. Beijing countered the move with World Artificial Intelligence Cooperation Organization (WAICO) earlier this year. All these are independent of Huang’s affair but the disclosure of the latter is certain to add more paranoia in the US AI eco system vis-à-vis fears of a Chinese catch-up in the biggest technological battle of our age.