Chinese AI Startups Close Capability Gap With U.S. Firms

Chinese artificial-intelligence startups, including Z.AI, Moonshot AI, and DeepSeek, are rapidly closing the capability gap with U.S. pioneers such as OpenAI and Anthropic. Industry leaders suggest the most advanced Chinese models now trail top U.S. versions by only a few months.

To offset restricted access to advanced chips caused by U.S. export controls, these firms have employed technical workarounds like multihead latent attention and mixture of experts. Some companies have also used distillation, training their models on outputs from U.S. systems. This practice led Anthropic to accuse Z.AI and Moonshot of policy violations.

Commercial growth has been significant, with Z.AI becoming the first Chinese AI model startup to list on the Hong Kong stock exchange and reporting $1 billion in annual recurring revenue. Despite these gains, Chinese firms continue to trail U.S. competitors in total capital and hardware access.