Has China Already Won The AI Race? Apple’s Latest Change Of Stance On Chip Providers Could Be Telling For US Industry Leaders

One of the biggest threats to US markets at a time when the ongoing artificial intelligence boom continues to drive widespread investor optimism is the threat of competitors emerging from China. Now, as Apple mulls using Chinese chips to gain an edge in its own AI buildout, markets are having to take stock once again in a sector that’s already battling it out against new rivals. 

When Chinese chatbot DeepSeek was launched in January last year, one investor labeled its introduction a ‘Sputnik moment’ as $1 trillion was wiped from the tech-heavy Nasdaq Composite index. 

While the news that Apple (Nasdaq: AAPL) is considering defying the Trump administration’s request against buying memory chips from China may not be striking the same level of fear throughout US markets, it could yet represent a watershed moment for the adoption of foreign AI technology by US firms. 

So far, well-known memory stocks have borne the brunt of Apple’s pivot, with Micron Technology (Nasdaq: MU) and SK Hynix (HXSCL: OTCPK) falling 7% and 5%, respectively. Elsewhere, SanDisk (Nasdaq: SNDK) shed around 9% in value while both Seagate Technology (Nasdaq: STX) and Western Digital (Nasdaq: WDC) lost 7% off the back of the emerging news story. 

Perhaps more worryingly for US firms is that Apple’s decision may open the door to other major clients looking further afield to support their AI ambitions, which may ultimately see the widespread outsourcing of artificial intelligence hardware. 

The Lure of Chinese AI 

If there’s one thing more surprising than Apple’s willingness to use chips from China, it’s that it’s taken this long for an S&P 500 leader to look beyond the Pacific Ocean for solutions to ongoing buildout challenges. 

Apple has been testing China’s CXMT chip across product lines that include iPhones and MacBooks, according to those close to the company. The move has been planned out as a direct result of an ongoing memory crunch that could undermine the company’s adoption of AI. 

The Magnificent Seven giant has already reportedly held talks with CXMT about supplying components with the goal of using them in some devices sold in China. However, the bigger aim would be to win over the White House’s support for doing direct business with the Chinese company. 

Although the Trump administration has been heavily at odds with business interests in China, Apple Insider has suggested that there could be some level of willingness to use a prospective deal as a bargaining chip with Chinese President Xi Jinping ahead of a September meeting between the two leaders. 

Apple’s prospective deal wouldn’t be the first time a major US firm has turned to China to fulfil its artificial intelligence needs. For instance, Airbnb (ABNB) already heavily relies on Alibaba (BABA)’s Qwen large-language model (LLM) for some of its operations, which CEO Brian Chesky labeled ‘fast and cheap.’ 

Given that China has consistently sought to lower the barriers to foreign direct investment (FDI) and overseas business interests in domestic markets, we could see the prospective Apple deal becoming the first of many when it comes to solving issues with memory capacity. 

In recent days, China has expressed opposition to countries taking sides when it comes to artificial intelligence, and with Free Trade Zone pilot programs active as a means of supporting more market entry for foreign businesses in areas like Shanghai, Hainan, Shenzhen and Beijing, we’re seeing clear signs of a nation that’s increasingly willing to do business. 

Is US AI in Trouble? 

There are some challenges that US AI chip stocks may need to hurdle to remain ahead of their Chinese counterparts. 

One of the biggest challenges is that Apple is an example of one of Wall Street’s most successful and sustainable stocks in terms of its market strength. 

With its capex sitting at 1.8% of revenue, there are perhaps no Mag7 stocks that are more adept at spending money wisely, and if Apple has decided that China is the place to support its long-term AI ambitions, it could be the catalyst for further exploration overseas. 

But as Brian Chesky has pointed out, China’s AI appeal extends far beyond chips. The low-cost AI models created by China can lower the cost of adoption for many firms in the United States helping to accelerate the growth ambitions of companies that have pledged to accommodate artificial intelligence into their operations in advance. 

First Mover Strength

The US economy remains closely related to the AI industry, but its early breakthroughs in the industry have helped to pave the way for a new generation of household names throughout the industry. 

This has supported greater user trust and brand recognition that could help to provide some long-term resilience should more companies begin to look to China to support their AI ambitions. 

Competition from China may be unsettling Wall Street more frequently, but the United States’ constellation of AI leaders has long shown that they’re capable of bouncing back against fresh setbacks.