U.S. Faces AI Dependency Risk as China Gains Tech Influence
U.S. risks becoming dependent on Chinese AI as global competition intensifies.
2 min read
For decades, American companies followed the straightforward rule: if another company can produce goods or services at a lower cost, we should purchase from them. This principle has been applied to rare earths, pharmaceutical supply chains, and steel, resulting in lower costs and more efficient capital allocation. However, the lesson learned from these dependencies is now being applied to artificial intelligence (AI), with growing concerns about the U.S. becoming overly reliant on Chinese technology.
Historical Patterns of Dependency
The U.S. was once the world’s dominant producer of rare earths, with California’s Mountain Pass at the center of the industry. However, by the 1990s, inexpensive Chinese production transformed the economics of the sector, leading to the closure of Mountain Pass’s separation operations in 1998 and the cessation of mining in 2002. Today, over 90% of the U.S.’s separated rare earths come from China or countries using Chinese material.
A similar pattern emerged with steel, where China’s expansion under laws allowing mass pollution, cheap labor, and currency manipulation led to a global price drop and the decline of many domestic producers. The pharmaceutical industry has also seen a shift, with active ingredients and chemical precursors increasingly sourced from China and India.
AI: The Next Frontier of Dependency
As AI becomes more integral to modern technology, concerns are rising about the U.S. becoming dependent on Chinese models. Unlike the previous industries, where the product was the focus, AI’s most important role is as an input, embedded in products and services without being visible to users. This makes the question of which AI model is the best less relevant than finding the cheapest and most reliable intelligence that can perform the job efficiently.
China is increasingly positioning itself as a key player in this market, offering open-weight AI models that are efficient and affordable. This could lead to a situation where American companies rely on Chinese intelligence for their products, even if they own the interface, application, or customer relationship.
Regulation alone may not prevent this trend. If the U.S. restricts open and affordable AI models, it risks creating a market where Chinese models dominate, leading to a new form of dependency. The lessons from rare earths, steel, and pharmaceuticals suggest that allowing cheaper products from China can lead to market dominance, and the U.S. must be cautious not to repeat this mistake with AI, the most consequential input of the 21st century.
Source: Daily Wire
