Former Google CEO Eric Schmidt says China trails the US in artificial intelligence by roughly six months, but he warns that the gap may not guarantee an American win. Talking about the intensifying global AI competition, Schmidt said that China is only about six months behind the US in AI capabilities. Along with this, he also warned that the country’s focus on making low-cost and free AI products could enable it to dominate the global adoption. Schmidt believes that if the Chinese AI companies continue to offer powerful AI models at little of no cost, then they could easily gain a huge and significant advantage in developing markets which will incur pressure on the business model of leading AI companies in the US.
Schmidt said some of China’s progress may have been enabled by access to cutting-edge chips that the country was “not supposed to have,” suggesting that some hardware may have been “pilfered or smuggled” into the country. Another factor, he said, is the use of AI distillation techniques, in which developers query advanced AI systems and use the generated responses to train their own models. The former Google chief also discussed how China has rapidly reduced the AI gap despite US export restrictions on advanced semiconductor technology. Such approaches, combined with software innovation, have helped Chinese companies narrow what was once viewed as a much larger technological gap.
Price may matter more than performance
The example, he said, shows how AI systems do not necessarily need to be the most sophisticated models available to deliver meaningful value to users. To illustrate the point, Schmidt highlighted a WeChat AI agent developed by Tencent Holdings that can scan medicine packaging and quickly provide personalised guidance.
Pointing to Anthropic’s rapid expansion, Schmidt said the company has achieved revenue growth at a pace that exceeds what Google experienced during his tenure as CEO. Despite growing concerns over the massive sums being invested in artificial intelligence, Schmidt dismissed suggestions that the industry is experiencing a speculative bubble. The technology investor, who owns a stake in Anthropic, argued that the sector’s financial performance demonstrates real customer demand rather than hype-driven growth.