CNBC's The China Connection newsletter: For Chinese businesses, it's not about which AI is the smartest

Core Insights - The competition between the U.S. and China in the artificial intelligence (AI) sector is a significant concern for investors, with Chinese companies focusing on cost-effective AI tools to navigate economic challenges [2][3] Cost Factors - OpenAI's gpt-oss model and DeepSeek are the most affordable AI models at $0.30 per 1 million tokens, while Google's Gemini 3 Pro costs $4.50 and Anthropic's Claude Opus 4.5 costs $10 [3] - Chinese companies are increasingly opting for open-source models to control costs, as highlighted by Movitech's CEO, who serves clients like Starbucks and Unilever [4] Usage Differences - U.S. companies primarily utilize AI for coding, while Chinese firms apply AI for specific operational improvements, such as enhancing production processes and compliance for state-owned enterprises [5] - AI has become a crucial productivity tool for Chinese businesses, especially in a sluggish domestic market, allowing companies to maintain competitive pricing [6] AI Model Preferences - Chinese companies prioritize reliability, control over AI outputs, and integration capabilities over the intelligence of the AI models [9] - AI has significantly improved productivity, with reports indicating that 10 employees can accomplish the work of 20 to 30 employees [10] Global Interest in Chinese AI - Chinese AI models are gaining traction internationally, with increased usage of models like OpenClaw and DeepSeek, which ranked third and fourth in usage respectively [11][12] - Moonshot AI's K2.5 model has seen its revenue from outside China surpass domestic revenue, indicating a growing global interest [12] Investment Trends - Moonshot's valuation increased by at least $500 million following the successful listings of its competitors, reflecting investor interest in Chinese AI companies [13] - Anticipation is building for further AI advancements from DeepSeek, especially as the Lunar New Year approaches [13][14] Innovation and Market Dynamics - The ability of Chinese companies to innovate in AI is linked to their capacity to offer competitive pricing, which is essential for business usability [15] - The Chinese private sector's ability to generate profit is crucial for maintaining innovation in AI, as noted by WisdomTree's director [15]