Trust, not price, will decide US-China AI race: Microsoft CEO

Cheaper Chinese AI models have rattled Wall Street twice in the past year and a half. Microsoft CEO Satya Nadella says neither shock changes his bet on who ultimately wins.

Nadella was questioned by Fareed Zakaria on CNN's GPS programme regarding if Moonshot AI's Kimi K3, which is a Chinese model and which temporarily created unease among US tech stocks post its July launch, will provide Chinese AI an advantage simply because it is relatively inexpensive.

Instead, Nadella emphasised infrastructure, saying, "If you look at the Chinese models, guess where these models run? These models run on a lot of the hyperscalers that are American, which means even the open-weight models from China will be dependent on the American cloud system.

Nadella framed America's edge as structural rather than technical, describing an approach built on other countries and companies trusting US stewardship of the technology they build on.

"As long as that remains, we will absolutely be competitive, and we will win," he said. The fact is that Microsoft has a personal interest in it since it owns a 27% share of the for-profit public benefit corporation that is OpenAI.

The Kimi K3 is the second Chinese model to disrupt US markets in under two years. Last year, the launch of DeepSeek made the US lose about $1 trillion in technology stocks as it showed the first evidence of Chinese labs being able to rival American AI capabilities at significantly lower costs.

The appearance of Kimi K3 revived the old fears in July due to coding and reasoning capabilities that compete with OpenAI and Anthropic models.