US remains global leader in AI, but China rapidly closing gap with cheaper models: JP Morgan

NEW DELHI: The United States continues to dominate the global artificial intelligence (AI) ecosystem, but China is emerging as a formidable challenger through cost-efficient AI models that are increasingly attracting enterprise adoption, according to a report by financial services major J P Morgan.

In its report, “Semiquincententacles: the US grip on global markets at 250”, J.P. Morgan said the US retains a commanding lead in AI readiness, innovation, infrastructure and investment, although Chinese firms are making rapid gains in the commercial deployment of AI models.

“The US is the most vibrant and prepared country for AI, with China close behind on some measures,” the report said, citing multiple global AI readiness indicators. According to the report, the United States remains at the forefront of AI development owing to its leadership in frontier AI laboratories, semiconductor technology, hyperscale cloud infrastructure and productivity gains linked to artificial intelligence.

JP Morgan noted that US companies continue to dominate the AI hardware ecosystem. Nvidia alone accounts for the bulk of global AI accelerator revenues, while technology giants such as Google, Amazon, Microsoft and Meta are increasingly deploying custom-designed chips to reduce costs and expand computing capacity.

The report also highlighted strong AI-driven productivity gains in the United States, stating that “Whether the issue is labor productivity or total factor productivity, the US leads the G10.” However, the report cautioned that China’s AI ecosystem is advancing rapidly, particularly in the area of open-weight and low-cost AI models.

According to JP Morgan, the most cost-efficient segment of the global AI model landscape is increasingly being led by Chinese companies. Referring to comparative assessments of AI performance and operating costs, the report said the “efficient frontier” is “dominated by China (DeepSeek, MiniMax, Xiaomi, Alibaba)” with only a limited presence from US models.

The report further noted growing market acceptance of Chinese AI offerings as businesses seek to reduce operating costs amid rising token pricing by leading US frontier AI companies. “OpenRouter shows a surge in API calls to Chinese models,” the report said, adding that by April 2026, leading Chinese open-weight models “scored within a few dozen Elo points of closed frontier models and cost 10x – 50x less per token.”

JP Morgan observed that some enterprises have already begun shifting workloads from expensive frontier AI models to lower-cost alternatives, a trend that could intensify if pricing pressures continue. At the same time, the report stressed that frontier AI models developed by US firms remain essential for advanced applications such as cybersecurity, scientific discovery, agentic systems and large-scale reasoning tasks, ensuring that American companies retain a technological edge despite growing competition.

The report noted that while the United States remains the global leader in artificial intelligence, China’s rapid progress in developing competitive and significantly cheaper AI models has emerged as one of the most important challenges to US dominance in the sector. (ANI)