By Ramesh Kumar
Publication Date: 2025-12-03 14:00:00
Another week has passed, and uncertainty continues regarding the export of Nvidia’s advanced AI chips to China. Those in favor of continued export controls argue that these chips will help build Chinese military systems that threaten the U.S. and its allies. AI chip controls, they argue, are also needed to maintain and grow American lead in the AI service market.
But they are wrong. These arguments assume that China cannot succeed in AI without access to these advanced AI chips, which is not the case.
Advanced AI chips simply reduce the cost of AI. Today’s state-of-the-art AI models require a large number of AI chips to build and run. An advanced chip has higher performance; therefore, fewer are needed to achieve the same AI performance.
But AI costs can be reduced in other ways. As DeepSeek showed, clever software and algorithm design can dramatically reduce the number of AI chips needed. China’s decision to open-source its AI models particularly allows it to leverage the best software and algorithms to reduce AI costs. Second, AI chips constitute only part of the overall costs. AI-based systems incur several other costs – engineering, data, software and licensing, regulations, energy, and infrastructure – where China has considerable cost advantages. Third, AI hardware performance depends greatly on packaging and interconnection – how AI chips are put together and connected. China can leverage its world-class strengths in both to achieve high performance….
