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Ray Dalio's prediction on China's play in AI wars

Jan 29, 2025 - businessinsider.com
Billionaire investor Ray Dalio highlighted China's strategic focus on producing inexpensive chips as a key factor in the AI arms race, drawing parallels to its approach in the electric vehicle sector. He emphasized that the AI competition is a critical battle no country can afford to lose, with China potentially leveraging its manufacturing capabilities to embed affordable chips in products like robotics. Dalio noted that while China may lag in chip technology, it is ahead in AI applications, positioning itself as both a disruptor and a target of disruption in the tech landscape.

The release of Chinese AI lab DeepSeek's cost-effective R1 model has caused significant ripples in the tech industry, leading to a sharp decline in US tech stocks, including a nearly $600 billion drop in Nvidia's market cap. This development has raised concerns about the impact of cheaper AI models on the demand for high-cost AI infrastructure and chips. Dalio cautioned investors against overvaluing tech companies, drawing comparisons to the dot-com bubble, and stressed the importance of evaluating share prices critically.

Key takeaways:

  • Ray Dalio believes China will leverage its manufacturing capabilities to produce inexpensive chips in the AI arms race.
  • Chinese AI lab DeepSeek's new lower-cost model has caused US tech stocks, including Nvidia, to tumble.
  • Dalio emphasizes that the AI war is crucial for countries, and winning it is more important than profits.
  • Dalio warns investors about the risks of overvalued tech stocks, drawing parallels to the dot-com bubble.
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