China’s AI edge runs on cheap code, but its chip bottleneck comes with a 25% toll

China is positioned to lead the world in AI models by 2030, according to Bloomberg Intelligence (BI), while its chipmakers are expected to reach only competitive status by then. BI analysts led by Francis Chan identified cost as China’s advantage, citing the country’s software optimization skills and its potential for cheaper AI deployment. US models may maintain a narrow frontier lead: President Donald Trump has said the US leads China by about a year, while BI put the gap at 3% on benchmarks.

China’s AI companies are still working out how to monetize their technology. BI expects a price war among AI firms to keep profits out of reach until companies price more rationally. Hong Kong’s technology market could offer an opening, as the Hang Seng Tech Index has lagged the global AI trade and is scheduled for an overhaul that will increase its exposure to AI and hardware names.

The December changes expand the index from 30 to 50 members, with 40 selected by market value and 10 chosen by sales growth over the past year. Hang Seng Indexes will announce the new members on November 20, and the changes will take effect on December 7. Two Chinese AI model developers, Zhipu and MiniMax, joined the index in June with initial weights of 0.53% and 0.36%. “The changes could materially improve the index’s growth profile and broaden exposure toward advanced hardware, AI and robotics,” BI noted.

China’s semiconductor industry faces a longer climb, with BI expecting the country to close the chip technology gap by 2030 without becoming fully self-sufficient. Washington has cleared Nvidia’s H200 chips for sale to China, and Trump said the US government would keep 25% of the revenue. Anthropic has advocated tighter export controls to preserve a 12- to 24-month US lead by 2028.

Beijing has restricted purchases of advanced chips but allowed selected AI firms to buy limited quantities from July. Those sales represented less than 1% of Nvidia’s data-center revenue in the quarter that ended in July. BI sees trade restrictions as an obstacle for China’s technology companies but expects industrial expansion to spread across more countries rather than stop. The report also projects that China will lead 8 of 17 strategic technologies by 2030, ranging from energy storage to biopharma manufacturing, although BI says that technological lead will not prevent China’s economy from slowing.