How dependent is the U.S. on China for the AI buildout?

The U.S. has successfully reduced direct trade with China, now representing only 9% of imports versus 22% in 2017. However, significant dependencies on China for AI-related inputs persist. This includes network equipment, magnets, and rare earth metals.

This creates a double-edged sword for portfolios. It may temper escalating trade tensions, but also injects downside risk into AI buildout and its projected benefits. Watch for potential new U.S. import bans and Chinese export restrictions.

Beyond trade, China's AI model development is rapidly advancing. Chinese-origin models already dominate token processing on platforms like OpenRouter, potentially suppressing AI prices globally. This competition could create a new source of deflation for U.S. companies.