China Curtails Excess AI Investment While Coordinating National Growth

This week, the so-called “Magnificent Seven” tech giants experienced a sell-off driven by company-specific shocks rather than bond market volatility, with concerns including AI server margin compression, tariff uncertainty, and China’s aggressive push to develop its semiconductor industry. China aims to triple its domestic AI chip output by 2026, advancing local designs compatible with U.S. technologies, signaling a broader structural shift in the global AI supply chain. Concurrently, the U.S.-China rivalry over AI has shifted from technological competition to a geopolitical contest over governance, digital standards, and global influence, with China promoting a multilateral and open-access model contrasting with the U.S.'s proprietary approach. Beijing is pursuing self-sufficiency in AI through state-led innovation and diplomatic efforts, even proposing the World Artificial Intelligence Cooperation Organization to shape global AI norms. However, Chinese authorities have recently called for coordinated AI development to avoid excessive competition and wasteful investment, aiming to leverage local strengths and prevent overcapacity, especially in AI data centers, reflecting a more measured strategy to sustain growth. These developments underscore a complex interplay of market pressures, geopolitical rivalry, and strategic industrial planning shaping the future of AI globally.