Jon Krohn: 00:06
This is episode number 880 on Manus and the Chinese AI
boom.
00:19
Welcome back to the SuperDataScience Podcast. I am
your host, Jon Krohn. Today we’re diving into the
fascinating AI boom that’s been sweeping across China
since early 2025, examining what this means for the
global AI landscape and markets in general. Just hours
after the launch on March 6th of Manus, a Chinese AI
agent, its registration site crashed from the sheer volume
of visitors.
00:44
Butterfly effect, the company behind Manus boldly claims
its technology outperforms OpenAI’s models, though
they’re now forced to grant previews by invitation only as
they struggle to handle so much traffic. There are even
reports of registration codes being sold on the black
market.
01:01
Manus is merely the latest manifestation of the AI mania
that has swept over China since January when DeepSeek,
which I covered back in episode number 860, shook the
global AI community with a model that delivered
comparable performance to Western counterparts at a
fraction of the cost. The effect on Chinese markets has
been nothing short of staggering since then. Chinese
stocks are experiencing their best start to a year on
record outpacing American ones by a considerable
margin. The Hang Seng TECH Index, which tracks the
biggest Chinese tech companies listed in Hong Kong, has
surged by more than 40% since mid-January alone.
01:40
The excitement stems from a belief that more affordable
AI will help innovators develop novel applications for the
technology. Cloud computing providers are ramping up
investment in data centers, triggering a cascade of capital
spending throughout the supply chain. But the big
question remains, will this boom have staying power?
01:58
In recent weeks, we’ve seen hundreds of large Chinese
enterprises spanning sectors from automotive
manufacturing and state-owned energy companies to
banks and food and beverage distributors. They’ve all
announced plans to integrate DeepSeek’s technology.
Even tech giants like Tencent are embedding DeepSeek
models into their products despite having developed
models of their own. This widespread adoption extends to
the public sector too, with city governments integrating
DeepSeek’s models into mobile applications for basic
citizen services. While government departments, hospitals
and universities across China are exploring how to
employ it for what they call party building activities. And
they’re not talking about a fun night out, they’re talking
about the Communist Party.
02:41
The hype has reached such a fever pitch that local equity
analysts joke that they must find a DeepSeek angle if they
want their research reports to gain any traction. Some
investors have gone so far as to speculate that DeepSeek
could single-handedly revive the property market in
Hangzhou where the company DeepSeek is
headquartered.
03:00
Chinese venture capitalists are equally enthusiastic. One
Beijing-based VC noted that integrating DeepSeek’s tech
into her portfolio of robotics companies has led to
significant cost reductions and performance
improvements. Amid this excitement, countless AI
startups have emerged across China. Some venture
investors are pouring money into these startups even
while acknowledging that they’re likely witnessing a
bubble forming.
03:25
As one Hangzhou-based investor put it, “It’s
overwhelming, but we have no choice. The economy is not
good, and there are not many opportunities elsewhere. So
we have to go into AI as fast as possible.” The strategy, according to this investor, is to invest in what Chinese
investors call an A-round, the earliest financing series,
and then exit during an A-plus round, which might come
just a few months later. Sounds like flipping homes to me.
03:53
But the Chinese government is also leaning into this
trend. On March 6th, China’s central government
announced plans to establish a venture capital fund with
a staggering trillion yuan. So that’s about 140 billion US
dollars earmarked for tech-focused investments. China’s
tech giants, including Alibaba, Baidu, Huawei, and
Tencent, are embracing the hype and hoping to capitalize
on the boom, particularly through their cloud computing
divisions. Last month, Alibaba made the ambitious
proclamation that its main objective was to achieve
human-like artificial general intelligence. Well, ambitious,
yes, but they’re joining a long list of firms that are
aspiring to do so. And yeah, anyway, on March 6th,
Alibaba released a new reasoning model that it claims
matches DeepSeek’s capabilities. So yeah, small
companies, as well as the big tech giants in China, all
racing in this AI boom.
04:46
Alibaba itself has committed around $53 billion over the
next three years to build data centers to meet the surging
demand for AI cloud services more than the company
spent over the past decade. So more expected to be spent
on cloud infrastructure in the coming three years relative
to the past 10. As already the market leader in China’s
cloud sector with a 36% share, Alibaba appears to be
betting that this growth in this area will offset the
sluggishness in its core e-commerce business.
05:14
Baidu, another tech giant, has already experienced a
substantial increase in its cloud revenue, helping to
counterbalance declines in other divisions that Baidu
has. In terms of hardware, that side of this boom is
always critical. The frontier of AI is driven by having lots of the latest hardware. And so demand for servers
optimized for AI has skyrocketed in China since early
February, roughly coinciding with DeepSeek’s rise to
prominence. Suppliers have begun offering all-in-one
servers that come pre-equipped with AI software. Many of
these are sold directly to companies, including
state-owned enterprises that prefer on-premises servers
for enhanced security. As an example, Sangfor
Technologies, founded by former Huawei employees, has
been one of the biggest beneficiaries of this trend with its
share price surging by about 140% so far in 2025.
06:06
China’s AI boom is driving capital investment throughout
the country’s hardware supply chain. According to
analysts at Jefferies, an American bank server
manufacturers may spend more than 1.4 trillion yuan,
which is like 200 billion US dollars over the next two
years as they expand production capacity.
06:23
However, it isn’t all roses. Some analysts are beginning to
urge caution. So someone named Kai Wang of
Morningstar, a really well-reputed ratings agency based in
the US, argues that DeepSeek won’t fundamentally
change most of the companies that have benefited from
the recent stock market rally in China. Another recent
rally faded when anticipated strong government support
for the economy failed to materialize. The same could
happen this year if companies struggle to monetize AI
effectively.
06:54
Access to advanced semiconductors could be another
challenge. For now, the supply appears to be sufficient.
Companies can still purchase H2O chips from NVIDIA,
though these are less powerful than NVIDIA’s top-tier
chips that America has barred China from buying. Local
chip designers like Cambricon, EnFlame, and Huawei are
working to try to close this gap and have begun supplying
some Chinese AI firms, but they’re not quite at NVIDIA’s level yet. So semiconductor limitations could still cause
China’s AI frenzy to lose momentum.
07:25
Some analysts worry that as new applications emerge,
driving demand for ever more computing power
constraints on chip supply will become increasingly
problematic. China’s leading foundry, the state-owned
SMIC, faces serious capacity constraints and can’t
produce the most advanced semiconductors. Even
Huawei’s best locally designed chips still lag significantly
behind NVIDIA’s in performance.
07:48
The geopolitical dimension adds another layer of
uncertainty. The Trump administration in the US is
reportedly considering even harsher restrictions on
China, including limiting access to the H2O chips that
NVIDIA can currently provide them. China’s market rally
is predicated on the belief that the cost of training and
running AI models will continue to decline. By restricting
access to chips, America could potentially drive those
costs back up, bringing China’s AI euphoria to an abrupt
end. We’ll see what happens.
08:18
As with many technological trends, we’re seeing both
genuine innovation and speculative excess in China’s AI
sector. The long-term implications for global AI
development, market dynamics, and geopolitical
relationships remain to be seen. These are indeed
fast-moving times and we’ll continue to monitor these
developments. Although this is one of the first episodes
I’ve ever done exclusively on geopolitical impacts of AI. If
that’s something you’re into hearing about all the time, I
highly recommend the news podcast last week in AI. I’ve
got a link to last week AI in the show notes. It’s a show
that I’ve co-hosted half a dozen times or so. I absolutely
love the hosts of that show, Andre and Jeremy. And they
haven’t paid me to plug them. I am just doing that because I think it’s such a great show. It’s the only
podcast I listen to.
09:07
So yeah, and then in terms of the implications for us as
hands-on practitioners, as many of us listeners are, or as
I am. There are some great things coming out of this, this
AI boom in China for everyone in the world. For example,
the trend towards open sourcing, data, processes, model
weights that DeepSeek has been taking a lead on. And so
hopefully we’ll see more of that all over the world. And
you as a data scientist or developer can take advantage of
all that open sourcing. And yeah, so there you go, the
positives no matter what happens.
09:47
All right, that’s it for today’s episode. If you enjoyed it or
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