The US is fighting a war against China over AI dominance. Surely China is fighting back, right? (Right?!)
The headlines are screaming this at us, everywhere we turn (here in the US, at least). From our 12/16/2025 AI Pulse on Perscient Pro: "The semantic signature tracking the view that big AI capex is needed to compete with China strengthened by 0.54 to 3.08, reaching its highest recorded level." Translation: the we-need-to-spend-on-AI-like-it's-a-war narrative is at peak intensity right now.
The White House hasn't missed a beat. The not so subtly named Genesis Mission promises AI accelerated scientific discovery at a Manhattan Project Scale (announced November 24, 2025). Ben Hunt's "World War AI" nailed the framing days before the White House announcement. He discussed it on Excess Returns shortly after:
The US government will increasingly present AI CapEx, AI development as a national security arms race, war footing in competition with China as a mortal enemy, very similar to the mobilization of the economy around World War II and crazy as it sounds, at essentially the same scale in terms of capital, in terms of energy allocation, in terms of consumer sacrifice as we experienced during World War II.
$4 trillion over 4 years. Same timeframe as WWII. Same (inflation-adjusted) dollar amount. Same story: there’s an existential threat, we all see it, and there’s only one path to survival.
But here's where it gets weird.
According to our 12/16/2025 AI Pulse on Perscient Pro, Nvidia CEO Jensen Huang highlighted "China's advantages at the infrastructure layer, noting that building a data center in the US takes about three years from groundbreaking to operation, while China can build very large facilities far more rapidly."
Notice what China is actually good at: building infrastructure faster. Not dominating AI. Not winning the technology race. Nothing about America, at all. Just, building stuff quick.
Louis Vincent Gave, who was on Excess Returns days after Ben, pointed out China felt the 2018 semiconductor embargo like a punch in the nose: "The US just declared economic war on us." So what did China do? They didn't declare a war back. They retaliated with a story they could control, and redirected everything they had into industrial resilience. According to Gave, starting in 2018,
The banks are essentially told by the government guys, no more loans to real estate, no more loans to the consumer. All the money has to go into industry because we have to move up the industrial value chain much quicker than we thought we did before.
China is narrating: "We got punched. We decided we need to be able to make everything ourselves. We're kind of there, now, and we're not stopping."
Are you seeing the mismatch? The US is in a war and the other side isn't fighting back.
Because the US is narrating an AI war to drive investment based on competitive threats. China is narrating infrastructure speed and supply chain independence to drive investment based on competitive advantages. Is anybody else surprised to learn the US thinks China cares about something China doesn't seem troubled by - and vice versa?
At this point, it probably doesn't matter if there's actually a war. Ben Hunt put it this way:
That presentation is at least as important, I kind of feel like is maybe more important than the reality itself - when it comes to markets, politics, and the way we lead our lives.
We're telling ourselves a story worth $4 trillion and Manhattan Project intensity. Policy follows story. Capital follows story. If the story says we're at war, capital markets and market prices are going to behave like it's true.
This is an attempt to tell a story so big it can bend the economy itself, not unlike WWII once did. True or not, whether anyone is fighting back or not, they’re telling it. And if the past few years have taught us anything, it’s that a story doesn’t need to be true to feel true.
So while China is solving a practical problem (supply chains, energy, industrial capacity), the US has committed to solving an existential threat (beating China at AI). Two countries. Same moment in time. Completely different wars.
The market and policy implications are going to be massive. Because even if there's no actual war - even if China's just minding its own business building factories and data centers - the US belief in the war is already reallocating trillions in capital, reshaping who gets electricity, what gets built, where investment goes.
The story matters more than what’s actually happening - at least for markets and policy. But while the U.S. is fighting to own the story of the future, China is busy building it.
P.S. This Zeitgeist distills two recent Excess Returns conversations - one with Ben Hunt, one with Louis-Vincent Gave - that together reveal how the same moment can generate opposite national myths. Once you see the pattern, you see it everywhere.
