DeepSeek's new AI model does not wow markets in fast-changing industry

Egan-Jones released an analysis on Tuesday examining how China's fast follower strategy is reshaping competition in artificial intelligence and what the shift could mean for investors and credit markets. The publication highlights recent developments following the temporary suspension of Anthropic's Claude Fable 5 after U.S. export controls were introduced. During that period, Chinese developer Z.AI released GLM-5.2, an open source model that the report says approaches the capabilities of leading Western models while operating at a fraction of the cost. Egan-Jones said China has repeatedly demonstrated an ability to commercialize technologies developed elsewhere by rapidly scaling production and lowering costs. The analysis argues that artificial intelligence increasingly resembles a capital intensive industrial business requiring significant investment in data centers, semiconductors, and electricity. According to the report, China's manufacturing capacity, power generation, and state supported infrastructure provide advantages that may become increasingly important as AI deployment expands. By comparison, permitting requirements, grid constraints, and other regulatory hurdles may slow infrastructure development in the United States and Europe. Egan-Jones also examines China's approach to treating artificial intelligence as a strategic industry. The report cites government intervention in cross border transactions and new restrictions affecting ownership and talent mobility, noting that these developments may limit direct investment opportunities in Chinese AI companies while increasing the importance of U.S. listed firms for investors seeking AI exposure. The publication further explores the convergence of artificial intelligence and physical hardware, including robotics and autonomous systems. It notes that China already plays a leading role in the production of industrial robots and consumer robotics, suggesting that future value creation may increasingly depend on the integration of AI with manufactured products rather than software alone. Egan-Jones concludes that while the United States continues to lead in frontier AI research, China's manufacturing scale, infrastructure, and ability to commercialize new technologies position it as an increasingly significant competitor in the next phase of artificial intelligence development.