Former CEO of Alphabet Inc.‘s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google, Eric Schmidt, said China trails the U.S. in the AI race by roughly six months, but it could still be the winner.
In a podcast called In Good Company, hosted by Nicolai Tangen, CEO of Norges Bank Investment Management, on Wednesday, Schmidt said, “I don’t know that they will get ahead, but I will tell you that…if they’re six months behind, then we’re already losing because their strategy is that the products are free.”
Chinese AI models are often free or less expensive, potentially attracting consumers in developing economies that cannot afford costly, closed Western systems, he said. Open-weight models could further accelerate global use.
He credited China’s progress partly to access to advanced chips he said were “not supposed to have” and were “pilfered or smuggled” into the country. He also cited distillation, in which developers query Western AI systems and train their own models using the responses.
Schmidt Downplays AI Bubble Concerns
Schmidt, who personally owns a stake in Anthropic, rejected comparisons between the AI industry and a speculative bubble. He pointed to Anthropic’s revenue growth and paying customers as evidence of commercial demand. Schmidt said that Google set a revenue-growth record during his tenure as CEO, but Anthropic surpassed it by growing at more than twice the pace.
“That’s real growth. It’s not fake. It’s real money, with real customers who are paying for something useful,” he said.
AI’s Price Tag: A Risk for US Big Tech?
Schmidt echoed IMD Business School professor Howard Yu, who told Benzinga that OpenAI and Anthropic’s four-to-six-month lead over Chinese AI rivals could prove “very perishable,” as many users do not need the most advanced models.
He cited Tencent Holdings Ltd‘s (OTC: TCEHY) WeChat agent, which quickly generated personalized guidance by scanning medicine packaging, to illustrate how less sophisticated AI can deliver practical value. For businesses, he added, cost matters, with executives weighing AI spending against hiring more employees.
In June, Polsia AI CEO Ben Cera warned that cheaper Chinese open-source AI models like DeepSeek‘s R-1 model and Alibaba Group Holdings‘ (NYSE: BABA) Qwen3 and Qwen2.5 could undermine the business models and valuations of OpenAI and Anthropic by offering near-frontier capabilities at a fraction of the cost.
He argued that enterprises may no longer justify spending millions on AI when comparable alternatives cost far less, declaring, “The bubble isn’t AI. It’s the price of AI.” Cera added that AI model-focused companies could face the biggest losses, while hyperscalers such as Alphabet may be better positioned to weather the shift.
Price Action: On a year-to-date basis, Google stock climbed 5.47%, as per Benzinga Pro. The stock traded 2.19 lower at $323.70 premarket on Thursday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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