How far is China from becoming self-sufficient in AI?

Published 11/05/2025, 10:56
© Reuters.

Investing.com -- China is making steady progress toward self-sufficiency in artificial intelligence, but full independence, especially in critical enabling technologies like AI compute, remains a long-term goal, according to UBS.

“China has varied levels of self-sufficiency in AI,” UBS analysts wrote, citing strong domestic capabilities in the application and intelligence layers, driven by dominant local internet platforms and low-cost model developers like DeepSeek.

However, they added that the enabling layer, which includes semiconductors and compute infrastructure, still presents hurdles.

UBS estimates China’s overall semiconductor self-sufficiency will reach 27% by the end of 2025, up from the “mid-teens” during the pandemic, as the country builds capabilities across segments such as DRAM, analog chips, and semi-cap equipment. 

The bank notes that progress has continued despite export restrictions.

The most challenging component is said to be AI compute, where global leader NVIDIA (NASDAQ:NVDA) holds over 80% market share. 

UBS wrote, “NVIDIA’s GB200 chip can generate around 40 images whereas Huawei’s 910C chip can generate only 13 images,” illustrating the performance gap. 

Still, Chinese companies held a one-third share of their domestic AI compute market in 2024, and UBS expects this to climb to 90% by 2029.

This localization drive will come at a cost, according to UBS. 

“Strong revenue growth will be generated at the expense of compromising performance,” UBS said, warning of weaker pricing power and higher costs for Chinese players. 

Nonetheless, domestic AI compute revenues are forecast to surge from $6 billion in 2024 to $81 billion by 2029, says the bank.

UBS recommends exposure to both global leaders like NVIDIA and Chinese firms such as Alibaba (NYSE:BABA) and Tencent (HK:0700), as “the AI compute market is big enough for all the players to grow.”

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.