AI Arms Race: U.S. vs China—These 4 Stocks Stand Out

Key Points

• Chinese AI stocks are outperforming top United States-based AI stocks.
• DeepSeek made the markets aware that Chinese AI companies weren't too far behind their U.S. counterparts despite having less advanced GPUs.
• Chinese AI large language models (LLMs) claim they can perform just as well for far less capital than United States-based LLMs.

The United States and China are two undisputed global superpowers, not just based on their economies and militaries but also in the artificial intelligence (AI) arms race. China-based DeepSeek caused shockwaves and was a game changer in AI. It revealed how its AI could do just as much or even more at a significantly smaller investment than its counterparts in the United States.

AI stocks were sent tumbling in the computer and technology sector, leading to over one trillion dollars of market capitalization being shaved off the markets on January 27, 2025. The fear was that this revelation could cause AI infrastructure spending to drastically slow down as companies realized they had been overspending.

The DeepSeek Shot That Rattled the Markets

While there were many disputes about the implications, the belief that a Chinese AI company could make these strides using lower-generation chips was unfathomable. In the AI arms race, the United States has advantages, including the most cutting-edge NVIDIA Co. NASDAQ: NVDA GPUs and ASML Holding N.V. NASDAQ: ASML extreme UV lithography machines capable of producing these chips.

There are trade sanctions that prevent both NVIDIA and ASML from selling their top technologies to China under national security concerns. Shortly after the DeepSeek reveal, more Chinese companies unveiled their latest AI technologies, indicating that China wasn’t too far behind in terms of AI. In fact, Chinese AI companies are performing much better than U.S. AI companies in 2025. Let’s take a look at the leading publicly traded AI companies for both countries to see how they shape up.

Microsoft: Leading the AI Revolution with OpenAI’s ChatGPT, First Mover Advantage

The AI revolution swarmed the mainstream spotlight thanks to the viral effect of ChatGPT-3 by OpenAI. ChatGPT gained 1 million users in five days and over 100 million monthly active users in two months after its launch after its launch in late 2022. Microsoft Co. NASDAQ: MSFT has invested nearly $13 billion for a speculated 49% ownership stake in OpenAI. Microsoft receives 75% of OpenAI’s profits until it recoups its initial $10 billion investment, then Microsoft's stake transitions to a 49% stake in the for-profit subsidiary.

OpenAI is attempting to turn into a fully for-profit organization, which has caused controversy with Elon Musk, CEO of Tesla Inc. NASDAQ: TSLA, who has started his own AI company, xAI and its supercluster Colossus powered by over 100,000 NVIDIA GPUs on its way to 1 million. Microsoft has exclusive rights to integrate OpenAI’s models like ChatGPT into its products (IE, Microsoft 365 CoPilot, Bing, Azure). Shares of MSFT are trading down -9.3% year-to-date (YTD) as of April 2, 2025.

Google: Gemini Gaining Ground

Alphabet Inc. NASDAQ: GOOGL, Google's parent company, is a leading AI innovator. It launched its AI chatbot a little later with its Google Bard, which later became Gemini. Google Gemini is a leading AI application that also charges $20 a month for access to its premium offerings, similar to the $20-a-month subscription charged by ChatGPT. It contains more current information versus ChatGPT, which is capped at a cutoff date (IE, April 2024 is the knowledge date as of April 2, 2025).

Gemini has an estimated user base of 200 million MAUs. Gemini is a one-stop shop for AI, from solving complex problems to generating images. Gemini also powers Google Search’s AI Overviews which comes up when using Google search. Gemini 2.5 introduces “thinking” models that use step-by-step reasoning to answer queries. Shares of GOOGL are trading down -17.2% YTD as of April 2, 2025.

Baidu: Ernie AI takes on ChatGPT in Multimodal Mode, Recognizing Memes

China's leading search engine, Baidu Inc. NASDAQ: BIDU, rolled out its large language model (LLM) called Ernie in March 2023, only after the Chinese government approved it. Ernie Bot was Baidu’s own version of ChatGPT. Ernie gained over 100 million users within months of its launch. Its latest version, Ernie X1 and Ernie 4.5, was launched in March 2025. Ernie X1 is a reasoning model that rivals DeepSeek R1. Ernie 4.5 is enhanced with multimodal capabilities (text, images, audio) and integrated into its cloud service.

This enables cross-modal reasoning, like understanding memes and slang. Baidu claims to have over 300 million monthly active users. Baidu also plans to open-source its Ernie models, starting with 4.5, to supercharge its widespread adoption in June 2025. Baidu claims it can do what DeepSeekR1 does at half the cost. Shares of BIDU are trading up 8.3% YTD as of April 2, 2025.

Alibaba: China’s Top Open-Source LLM Qwen

Leading Chinese e-commerce platform operator Alibaba Group Holding Ltd. NYSE: BABA launched its flagship LLM Tongyi Qianwen, nicknamed Qwen, in April 2023 through its Alibaba Cloud unit. Qwen 2.5 -Omni-7B is a unified end-to-end model that can process text, audio, images and videos and generate real-time text and natural speed responses. Its compact size makes it an ideal foundation for developing AI agents. 

According to Alizila, it has many practical use cases, “For example, the model could be leveraged to transform lives by helping visually impaired users navigate environments through real-time audio descriptions, offering step-by-step cooking guidance by analyzing video ingredients, or powering intelligent customer service dialogues that really understand customer needs.” It’s bi-lingual in Chinese and English. Alibaba Cloud claims its Qwen 2.5 model beats DeepSeek and GPT-4o. Alibaba Cloud is planning to launch Qwen 3 in April 2025. In terms of stock performance, Alibaba is the clear winner. Shares of BABA are trading up 53.1% YTD as of April 2, 2025.