U.S. AI Lead Evaporates as Chinese Models Close the Benchmark Gap

The United States' lead in artificial intelligence has nearly evaporated. According to Epoch AI's 37-benchmark index of the best models, China has reduced its performance deficit from 36 points behind the U.S. in early 2024 to just 6 points today, resulting in a virtual tie for frontier capabilities.
U.S. mega-cap valuations currently factor in a durable AI moat, operating on the assumption that only a select few American labs can develop top-tier models. However, this near-tie in capabilities shrinks that competitive advantage from years down to months.
If the best AI models become a commodity, the pricing power and premium valuation multiples built on their perceived scarcity are expected to disappear. This shifting landscape presents a substantial risk to the M7 trade.