The Week: China Is Undercutting America’s AI Boom

George Hahn connects the dots across the week’s biggest stories: how cheaper Chinese models are challenging America’s AI dominance, why Oracle’s growing debt is raising alarms about the AI boom, and what Derek Thompson’s “antisocial century” reveals about risk, isolation, and the declining power of friendship. We’d love your feedback as we build this show! Let us know what you think: [email protected]. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:31Speaker 01

  I'm Ina Garten, and each week on Happy Hour, I invite new and old friends for a drink and a fun conversation at my kitchen table in New York City. On this week's episode, I'm joined by Sofia Coppola. Sofia is an Academy Award winning filmmaker. We chat about the hilarious way that we met, our shared love of Paris, and what influences her iconic personal style. New episodes of Happy Hour are available every Wednesday. You can watch on YouTube or listen wherever you get your podcasts. Cheers.

• 1:09Speaker 02

  Hey, everybody. Cassidy Hubert here. This week on Ann Mom, we spoke with Grammy Award winning musician Corinne Bailey Rae about taking her kids on tour, becoming a widow at 29, and how she felt about having a home birth. Check out the latest episode of Ann Mom wherever you get your podcasts.

• 1:28George Hahn?

  Welcome to the week from Prof G Media, where we break down what mattered and what it all means. I'm George Han, and it's Friday, July 24. Today, China is challenging America's AI dominance with cheaper models and a better global reputation. Then the debt piling up beneath the AI boom. And finally, how the casino economy is turning young men into monks. Let's get into it.

• 2:03George Hahn?

  Last Thursday, a Chinese startup, Moonshot AI, released a model named Kimi K3, the largest open weight model ever built. On some benchmarks, it outperforms the best models from OpenAI and Anthropic. It also runs at about a third of Anthropic's price. On Monday's Prof G Markets episode, Scott argued that Kimi is part of a much bigger threat to America's AI industry.

• 2:32Scott Galloway?

  Well, I think the biggest story that has, that it's got almost no, no coverage is that is what I think is, I would refer to affectionately as, is AI dumping from China. And that is three Chinese models went from less than a third of all traffic in late 2025 to about two thirds recently. And it's much less expensive. I mean, essentially what's happening in the air market has condensed what's happened to industrial economies in Europe. But instead of it taking two decades, it's taken two months. And that is they steal the IP on a cell phone tower from Siemens, and then they manufacture it with cheaper labor, and they sell it back to telcos for 40 cents on the dollar. And there are a lot of regional LLMs in China,

• 3:17Scott Galloway?

  and they have access to cheaper power, cheaper chips, less power consumptive. And they're also subsidized by their own local governments. And I believe, and I said this before, that she has a vested interest at the ultimate Ohio class submarine to be flipped against us is to engage in AI dumping. And I think it's happening. And you hear stories of VCs encouraging the portfolio companies to use these open weight Chinese models. But you're seeing the best business model in history is IP theft. A close second in terms of a pricing mechanism is 80% of the market leader for half the price. And DeepSeek and these Chinese open weight models claim they're 90% of the market leader for a third of the price. I think this is going to be the next geopolitical pawn

• 4:02Scott Galloway?

  once Trump actually, if Trump actually figures out what's going on here quickly enough.

• 4:07George Hahn?

  Ed's read is that an AI price war has already begun, and that America's leading labs are fighting it with money they don't actually have.

• 4:16Ed Elson?

  I think the most significant and the most important is the price war that appears to be breaking out right now. And that is the pricing of these AI models is clearly becoming front of mind for enterprises. And it is very quickly becoming a race to the bottom. Because you have Meta that is coming out with their model, which is dramatically cheaper. And they have literally stated that it is their mission to initiate a price war, because they know that they can play that game. They have the cash. OpenAI and Anthropic can only play that game for so long, because where are they getting their money from? They're not getting it from profits. They're getting it from venture capital. And so at some point, if the investor spigot turns off,

• 5:02Ed Elson?

  they can no longer play that game. Gemini is also pricing their models lower. But the elephant in the room, and I'm 100% in agreement with you on this, is clearly the Chinese models. It is clearly DeepSeek, Kimi, all of these Chinese models, which are so dramatically cheaper than the US models, that it's hard to actually fathom. Just to go through the data here, the price per million output tokens for OpenAI's model, GPT 5.6, is $45. For Claude Fable 5, it's $50. The equivalent price for DeepSeek's model is 87 cents.

• 5:44Ed Elson?

  So it is 99% lower than the American alternatives. And obviously now we're seeing that China is stealing market share. I don't, I don't know. I mean, we see all these benchmarks and like, which model is the best? And there's all these debates, like, you know, people kind of generally assume that OpenAI and Anthropic have the best, best in class, world class models. I'm not going to chime in on that. But what I do know is that people are using the Chinese models because the Chinese models can get the job done fast enough, well enough. And they are so much cheaper that it would be ridiculous not to turn to them, which is why you're seeing the increase in market share. It's also why you're seeing a lot of these blue chip American companies

• 6:27Ed Elson?

  that are making that switch.

• 6:30George Hahn?

  That's the supply side of the story. But on Tuesday, Ed asked Charlie O'Neil, co head of model training at the AI infrastructure company Base10, whether this is really a fight between two countries. O'Neil has spent his career working with both open and closed models. He thinks nationality may be a distraction.

• 6:52Speaker 06

  Yeah, I think the big story here is not necessarily Chinese models versus American models. I think the big story here is open source versus closed source. So obviously, the story we've been sold for the last, you know, several years is that closed source is going to continue to dominate. The American frontier closed source labs are going to continue to pull ahead, and open source will never catch up to that. And I think what we're seeing with, with Kimi, with, you know, other Chinese models like GLM. GLM caused a very, very big wave. It may not have done the rounds in the same way that Kimi did, but it was certainly a great model. And even like releases like Incline from Thinking Machines, which is an American company. What we're seeing is that basically the recipe to build these things, there's no secret sauce. The big labs, they don't have anything that the open source labs don't have.

• 7:35Speaker 06

  And open source is going to continue to improve the capabilities and intelligence of the models they release as we scale up the size of these models and the amount of data and compute that goes into them. And so, yes, from, from one kind of aspect, it's concerning that this is like a Chinese model that is leading the charge with, with this sort of like open source versus closed source debate. But I think there's really promising signs for the open source ecosystem in general. And I think a lot of people are starting to realize that that's potentially a better world to end up in where, compared to where you have maybe a duopoly with OpenAI and Anthropic having these models that pull away from everyone else. And, and they dictate all the terms of access and, and control that intelligence.

• 8:13George Hahn?

  The models are just one front. Reputation is another. And China is gaining ground there, too. Pew found 46% of people worldwide now view China more favorably than the United States. Just three years ago, that split ran decisively in America's favor. And it isn't only Europe. Here's China decodes Alice Han.

• 8:38Alice Han?

  It's pretty shocking. You look to the US as close as neighbors, Canada and Mexico. So Mexico is a 19 percentage point swing in favor of China, where 59% of people have a more favorable opinion of China versus the US. And Canada is an 11 percentage point swing in favor of China. I mean, it seemed like only yesterday where we had scandals involving the two Michaels in, in Canada, you know, putting on sanctions on China, et cetera, et cetera. It's astounding to me that the two closest neighbors and most of Latin America.

• 9:12Alice Han?

  Have a more favorable view of China versus the US.

• 9:16George Hahn?

  The divide shows up inside the AI story, too. Alice discussed it with guest Selena Xu, former China reporter for Bloomberg.

• 9:24Alice Han?

  Eighty-four percent, this is a shocking number. Eighty-four percent of Chinese surveyed respondents said that they were more excited than worried about AI. Versus the US, 10% said that they were more excited rather than worried, meaning that a higher number potentially could be worried in the US about AI. But it speaks to how there is quite a dichotomy in sentiment between Americans and Chinese. Can you explain that?

• 9:48Speaker 08

  I think this statistic took a lot of people by surprise. There were a few other surveys by Edelman and others that people started paying attention to. But I think as negativity in the US towards AI grew to quite a feverish pitch this year, people are suddenly like, oh, my God, why is China so much more positive? And obviously, you know, the surveys are not fully representative of sentiment on the ground, which is often not monolithic. But being in China a few times this past few months, I think the main thing, the main attitude difference that I sense between Chinese and Americans is that in China, people are very pragmatic. They don't see AI as this, you know, in general, this machine god.

• 10:32Speaker 08

  Talk of AGI or artificial general intelligence is pretty much absent from most convos other than if you're talking to a very specific minority of Westernized, you know, policy elites. And for the average Chinese person, AI is either a tool where maybe they have to learn because they are mandated to by their bosses in their jobs. All these very doomsday, what people now call doom trolling in the US of like, AI will make us extinct, AI machine god's going to come. It would be like the Terminator. It's terrible. There's none of that, even with all the humanoid craze in China, which actually is another structural advantage on hardware side for the US-China AI race for China.

• 11:17George Hahn?

  Cheaper models and a public that is far more eager to use them. For America, that's a difficult combination to compete with. We'll be right back after the break.

• 11:32Scott Galloway?

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• 12:33Scott Galloway?

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• 13:43Scott Galloway?

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• 14:54George Hahn?

  Welcome back. For months, the debate over AI has gone back and forth. Is it a bubble? Is it not a bubble? And would we even recognize the warning signs before it burst? This week brought one of the clearest signs yet that the market's AI trance may be starting to break. Oracle is down 35% this year, and its credit rating now sits just one notch above junk. On Wednesday, the state of Wisconsin demanded the company post $7 billion in collateral before it builds a data center there. Here's Ed on why a utility regulator suddenly wants its money up front.

• 15:36Ed Elson?

  Oracle borrowed $43 billion to build data centers over the past year. That's against its $67 billion in revenue. But revenue doesn't pay debt down, free cash flow does. And Oracle's free cash flow is negative. It burned roughly $24 billion over the same period. So taking on record debt while running negative cash flows, well, that is a great recipe for a default, which means that every time anyone agrees to loan Oracle money, they are now taking on an increased level of risk, which means they must now charge Oracle higher interest rates to compensate for that risk.

• 16:18Ed Elson?

  The result: higher borrowing costs and a $7 billion collateral bill, which will cost Oracle more than $100 million a year. We have said it before, we will say it again. Bubbles aren't built with equity, they are built with debt. And increasingly, the AI buildup is becoming reliant on debt.

• 16:37George Hahn?

  And speaking of risk, writer Derek Thompson joined Scott Thursday to talk about what he calls the antisocial century and about an essay he wrote on young men called Monks in the Casino. Scott asked whether people have a fixed appetite for risk and whether we've simply changed where that appetite gets spent.

• 16:59Derek Thompson?

  I think of it as almost a clean transference of the risk impulse outside of one's home or room toward the risk impulse being entirely cultivated and spent, so to speak, inside of one's room. And I mean, I'm obsessed with this phenomenon, and there's a bunch of different places to take it. I remember in that, at the end of that essay about monks in the casino, I become really, I'm really interested in this inversion of risk, where I think I was talking to someone about this phenomenon, and they said, you know, the sociologist, the early 20th century sociologist Max Weber, had this idea that it was Christianity that gave birth to capitalism and Christian asceticism in particular.

• 17:40Derek Thompson?

  This idea that Puritans wanted to save money that could then be pooled, and then that pooled saved money could be used to invest in other enterprises, and that was the foundation of capitalism. But in a way, what we're seeing now is an entire inversion of that principle, because it's capitalism that is giving birth to a kind of wretched asceticism, that is to say, like, the casino economy is turning our young people into monks. And like, that is, it's an unbelievably strange and fascinating phenomenon to me. And again, it's not just fascinating, I think it is fundamentally sad. It is fundamentally sad, even if you like gambling, even if you think the Kalschi is like the most interesting and wonderful invention

• 18:24Derek Thompson?

  in the last 20 years. It's sad to me because the research that we have says so strongly that we tend to overvalue and over-demand solitude when we are given solitude as an opportunity.

• 18:39George Hahn?

  But what do we lose when isolation begins to feel safer than participation?

• 18:44Derek Thompson?

  Life isn't just Netflix and work. Life is often tragedy. Life is often losing a job, losing a parent, dealing with a mental health crisis. And in those moments, not having a social group to fall back on, that is the real risk. It's interesting, you mentioned two things in your wind-up. You mentioned socialization, and you mentioned vaccines. And there's a way in which those ideas connect in a weird way. You can almost think of socialization as a kind of vaccine against a certain kind of isolating misery. Like, why do you get a vaccine? Do you get a vaccine in order to help you when you're at your healthiest?

• 19:25Derek Thompson?

  No, you get a vaccine so that, in the worst case, you don't get COVID, measles, rubella, et cetera. So while I think friendship is delightful in its own intrinsic sense, like, I love getting drinks with my friends, I love playing board games with my friends, I love hanging out with my wife. It's also the case that maybe the ultimate payoff of social connection isn't just sharing a martini on a Tuesday night. It's that moment when your parents die, when your sister won't talk to you, when your boss is being terrible to you, when you've lost your job. These kind of, you can almost call them like moments of social illness, when what you need is the equivalent of a social vaccine

• 20:09Derek Thompson?

  to inoculate you against the inevitable misery that every single person is going to feel in this world, in this life. So that, to me, is the real cost of not exercising the friendship muscle. It's, like, being with friends is awesome, but when you really, really need people who understand and love you, when you're in those deep, dark moments, that's where the biggest payoff of friendship can come. And if you haven't been investing in these kind of relationships, then you are entirely on your own at the very moment that you need to be surrounded by love.

• 20:46George Hahn?

  Friendship isn't just a source of happiness. It's an investment in the people who will be there when happiness becomes harder to find.

• 20:56George Hahn?

  That's the week. I'm George Han. We'll see you next Friday.