Biden gave China the AI advantage
By willowt // 2025-01-29
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  • The United States finds itself lagging behind China in the global AI race, a position once thought unlikely. Chinese companies like DeepSeek and ByteDance are releasing AI models that rival U.S. giants like OpenAI and Google, with significant cost and efficiency advantages.
  • The open-source and cost-effective nature of Chinese AI models is seen as a strategic economic threat. These models are up to 95% cheaper to develop, potentially disrupting American software and hardware companies.
  • The Biden administration's restrictive policies towards AI startups and development, coupled with "AI safety" executive orders, are cited as key factors in America's AI decline. These actions are contrasted with the Trump administration's efforts to reverse such policies.
  • The Biden administration's attempt to limit China's access to high-end AI hardware (NVIDIA GPUs) inadvertently spurred Chinese innovation, leading to breakthroughs in cost-effective AI applications. This has allowed China to share its advancements openly, further eroding U.S. dominance.
  • In response to the AI shift, President Donald Trump has launched the $500 billion StarGate project, a collaboration with tech giants to build AI data centers and infrastructure. This initiative is seen as a step towards addressing the challenges posed by China's AI advancements.
In a surprising turn of events, the United States finds itself playing catch-up in the global race for artificial intelligence (AI) dominance, a position that many thought would never come to pass. The past month has seen a surge in Chinese AI capabilities, with companies like DeepSeek and ByteDance releasing models that are not only on par with the best from U.S. giants like OpenAI, Google and Anthropic but are also significantly cheaper and more efficient. This shift is not just a technological setback; it is a strategic and economic disaster that can be traced directly to the policies of the Biden administration.

The rise of Chinese AI

Chinese companies have made remarkable strides in AI, particularly with the release of DeepSeek’s R1 reasoning model. According to Marc Andreessen, a legendary venture capitalist and tech entrepreneur, "This Chinese model is ‘open source,’ meaning anyone can freely use it in their own applications. And it costs 1/10th to 1/30th as much as the equivalent U.S. models." The implications are massive. China is now "dumping" cheap, high-quality AI access on the world, a strategy they have used to dominate other industries like steel, cars and rare metals. The cost advantage is not the only concern. These new models are about 95% cheaper to build compared to top American models. This efficiency could threaten not just American AI software companies but also hardware giants like NVIDIA. If cutting-edge models can be trained with 5% of the previous hardware requirements, what does that mean for the future of GPU sales?

Biden’s role in the decline of American AI

The root of this problem can be traced back to two words: Joe Biden. The damage his administration caused to American AI efforts will echo for the next decade. President Trump is already working to reverse the damage, but the setback will take time to overcome. The Biden administration's first move was to attempt to strangle America's AI industry. In a meeting with Andreessen’s venture capital firm, Biden officials made it clear that they intended to control the AI industry tightly. Andreessen described the meeting as "absolutely horrifying," quoting the officials as saying, "Don't fund AI startups. That's not something that we’re gonna allow to happen. They’re not gonna be allowed to exist." The officials further stated, "AI is going to be a game of 2 or 3 big companies working closely with the government. We're gonna protect them from competition, control them and dictate what they do." These policies were designed to limit competition and innovation, effectively handing China the keys to the AI kingdom. The Biden administration also issued AI "safety" executive orders that were intended to limit the development and deployment of AI technologies. While Trump has already repealed these executive orders, they set the U.S. back for over two years.

The failed containment strategy

In 2022, the Biden administration attempted to contain China’s AI advancement by cutting off the country’s access to high-end NVIDIA GPUs, the only suitable hardware for building and running AI applications at the time. This move backfired spectacularly. By cornering China, the Biden administration gave them a clear and urgent need to innovate. The result? China learned to build cutting-edge AI applications without high-end GPUs, reducing their costs dramatically. This innovation is now being shared openly, allowing the world to benefit from China’s breakthroughs. If the U.S. had simply allowed China access to top NVIDIA chips, these breakthroughs might not have happened for years. NVIDIA would have sold a lot more chips, and the U.S. would have maintained its technological edge.

The road ahead: Trump’s StarGate project

The era of underestimating China’s AI sector is over. The project to contain their development has failed, and it’s time to strike a deal. President Trump is already taking steps to address these challenges. He has launched the $500 billion StarGate project, a joint venture with OpenAI, Oracle and SoftBank, aimed at building AI data centers and electricity infrastructure to power them. However, the lessons from Biden’s mistakes must be taken to heart. American companies will need to step up and release new, cutting-edge products, even if they are unsure about issues like safety. The wakeup call has arrived, and we can no longer rely on brute force to dominate the AI landscape. The future of AI is uncertain, but one thing is clear: the Biden administration’s policies have handed China a significant advantage. It will take time, innovation and a renewed focus on competition to reclaim our position as the global leader in AI. The Trump administration’s efforts are a step in the right direction, but the road ahead is long and fraught with challenges. In the meantime, the world watches as the balance of power in the AI sector shifts, and the United States must adapt to a new reality where China is no longer the underdog. Sources include: DailyReckoning.com X.com APNews.com
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