Core Viewpoint - The ultimate competition in AI between China and the US may not be about computing power but rather about electricity supply, as AI's increasing demands for power will determine who can sustain their operations longer [5][10]. Group 1: US AI Industry Challenges - The bottleneck for the US AI industry has shifted from chip availability to electricity supply, with major tech companies struggling to secure sufficient power for their operations [9][10]. - AI applications, such as ChatGPT, consume significant amounts of electricity, with estimates indicating that daily operations could power 17,000 American households [11]. - The aging US power grid, built decades ago, is unable to meet the surging electricity demands, leading to potential power shortages in certain regions by 2030 [11][12]. Group 2: China's Energy Advantage - China is leveraging its energy advantages to compensate for product performance disadvantages in the AI sector, particularly through initiatives like "East Data, West Computing" [15][18]. - This initiative aims to transfer data processing from energy-rich western regions to eastern areas where demand is high, optimizing the use of clean and inexpensive electricity [16][18]. - The recent electricity subsidy for AI data centers in China is seen as a strategic move to enhance competitiveness against US firms by reducing operational costs [5][7][25]. Group 3: Cost Structure and Subsidies - The electricity subsidy fundamentally alters the cost structure for companies considering domestic chips, making it more attractive to switch from foreign to local alternatives [25][32]. - The new cost formula for AI operations in China now includes reductions in energy costs due to the "energy scheduling dividend" and fiscal subsidies, making domestic chips more competitive [31][32]. - The subsidy is designed to cover the ecological migration costs associated with transitioning to domestic chips, providing critical time for the development of local ecosystems [32]. Group 4: Strategic Implications - The combination of energy advantages, subsidies, and domestic chip development forms a closed-loop system aimed at challenging Nvidia's dominance in the AI ecosystem [33][40]. - As AI competition evolves from a focus on chip performance to resource management, China's ability to maintain lower operational costs could provide a significant competitive edge [41][45]. - The strategic focus is not only on defense but also on offensive maneuvers against established players like Nvidia, with the goal of redefining the competitive landscape [42][46].