Former Google CEO Eric Schmidt says China trails the US in artificial intelligence by roughly six months, but he warns that the gap may not guarantee an American win. Talking about the intensifying global AI competition, Schmidt said that China is only about six months behind the US in AI capabilities. Along with this, he also warned that the country’s focus on making low-cost and free AI products could enable it to dominate the global adoption. Schmidt believes that if the Chinese AI companies continue to offer powerful AI models at little of no cost, then they could easily gain a huge and significant advantage in developing markets which will incur pressure on the business model of leading AI companies in the US.
Eric Schmidt ‘If they’re six months behind, we’re already losing’
As reported by Benzinga, speaking on the In Good Company podcast hosted by Nicolai Tangen, CEO of Norges Bank Investment Management, Schmidt said China’s position in the AI race is much stronger than many in the West may believe. He argued that even if Chinese AI firms remain slightly behind the technological frontier, their strategy of offering inexpensive or free AI services could help them win users at a global scale.“I don’t know that they will get ahead, but I will tell you that if they’re six months behind, then we’re already losing because their strategy is that the products are free,” Schmidt said.Schmidt noted that many Chinese AI models are either free or significantly cheaper than their Western counterparts. Combined with the growing popularity of open-weight models, this pricing strategy could make Chinese AI offerings particularly attractive in emerging economies where businesses and consumers may not be able to afford premium AI subscriptions.
Google’s ex-CEO points to smuggled chips and AI distillation
The former Google chief also discussed how China has rapidly reduced the AI gap despite US export restrictions on advanced semiconductor technology. Schmidt said some of China’s progress may have been enabled by access to cutting-edge chips that the country was “not supposed to have,” suggesting that some hardware may have been “pilfered or smuggled” into the country.Another factor, he said, is the use of AI distillation techniques, in which developers query advanced AI systems and use the generated responses to train their own models. Such approaches, combined with software innovation, have helped Chinese companies narrow what was once viewed as a much larger technological gap.Schmidt has previously said that China was one to two years behind the US in AI development. He now believes the gap has shrunk to less than six months, highlighting the speed at which Chinese AI firms have progressed
AI is not a bubble, says Eric Schmidt
Despite growing concerns over the massive sums being invested in artificial intelligence, Schmidt dismissed suggestions that the industry is experiencing a speculative bubble. The technology investor, who owns a stake in Anthropic, argued that the sector’s financial performance demonstrates real customer demand rather than hype-driven growth.Pointing to Anthropic’s rapid expansion, Schmidt said the company has achieved revenue growth at a pace that exceeds what Google experienced during his tenure as CEO.“That’s real growth. It’s not fake. It’s real money, with real customers who are paying for something useful,” he said.
Price may matter more than performance
Schmidt’s comments come amid an increasingly common view in the AI industry that affordability could become a bigger competitive factor than having the absolute most advanced model. While frontier AI systems continue to grab headlines, many businesses are primarily interested in practical tools that deliver acceptable performance at a reasonable cost.To illustrate the point, Schmidt highlighted a WeChat AI agent developed by Tencent Holdings that can scan medicine packaging and quickly provide personalised guidance. The example, he said, shows how AI systems do not necessarily need to be the most sophisticated models available to deliver meaningful value to users.He added that businesses evaluating AI investments often compare the cost of adopting AI tools with the cost of hiring additional employees, making pricing a critical consideration for enterprise adoption.