# Eric Schmidt says China trails US by 6 months but may win AI race

Digest AI · Business & Funding · published 2026-10-24T17:00:00Z

Canonical: https://digestai.news/story/eric-schmidt-says-china-trails-us-by-6-months-but-may-win-ai-race

## Summary

Eric Schmidt, former CEO of Alphabet, stated on the In Good Company podcast that China lags behind the United States in artificial intelligence by approximately six months. However, he warned that the US is effectively losing because Chinese AI products are often free or significantly cheaper. This pricing strategy allows Chinese models to attract users in developing economies who cannot afford expensive, closed Western systems. Schmidt attributed China's progress to the smuggling of advanced chips and the use of distillation techniques, where developers train models using responses from Western AI systems.

Schmidt also dismissed concerns about an AI bubble, citing his personal stake in Anthropic. He noted that Anthropic’s revenue growth exceeded the record set by Google during his tenure, with more than twice the pace. He emphasized that this represents real commercial demand from paying customers. Additionally, he agreed with Howard Yu, a professor at IMD Business School, that the current US lead is perishable. Many users do not require the most advanced models, as illustrated by Tencent’s WeChat agent, which provides practical value with less sophisticated technology. For businesses, cost remains a critical factor when weighing AI spending against hiring.

## Key points

- Eric Schmidt says China trails the US in AI by roughly six months.
- Chinese AI products are often free, making them attractive to developing economies.
- Schmidt credits chip smuggling and distillation for China's AI progress.

## Why it matters

The price gap between US and Chinese AI models could shift global adoption, particularly in developing markets. This challenges the dominance of expensive, closed Western systems and highlights cost as a key competitive factor in the AI industry.

## Sources

1. [Google’s Ex-CEO Says China Trails US by 6 Months in AI Race, but Could Still Win Due to This Strategy: ‘We’re Already Losing’](https://finance.yahoo.com/technology/ai/articles/google-ex-ceo-says-china-033016284.html) (finance.yahoo.com, 2026-10-24)

Part of the developing story: [Chinese AI Models Challenge US Dominance](https://digestai.news/thread/z-ai-deploys-glm5-3flash-on-100-000chip-chinese-cluster) (10 stories)

## Cite

Digest AI, "Eric Schmidt says China trails US by 6 months but may win AI race", 24 October 2026, https://digestai.news/story/eric-schmidt-says-china-trails-us-by-6-months-but-may-win-ai-race

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