China is building an AI war machine. Washington must wake up before it’s too late
On June 24, OpenAI unveiled its first custom-built inference chip, developed with Broadcom and known internally as "Jalapeño." Most Americans will never see it. Yet Beijing certainly noticed. The announcement signals that the contest between America and China has moved beyond software and chatbots into a struggle for control of the infrastructure that will shape economic, military and technological power in the twenty-first century.
The nations that control the chips, data centers, electricity and networks behind advanced computing systems may shape the global balance of power for decades to come. That reality should concern every American.
While Washington debates inflation, immigration and the latest foreign crisis, a new Cold War is accelerating beneath the surface. Unlike the last one, this competition is not primarily about nuclear weapons, tanks, or ideology. It is about machine intelligence.
Most Americans treat advanced computing systems as consumer conveniences, useful for answering questions or drafting emails. China does not. Beijing treats those same systems as instruments of national power, capable of reshaping military effectiveness, economic output, industrial competitiveness and global influence.
Recent developments reveal how rapidly this competition is evolving. Chinese computing firm DeepSeek is seeking roughly seven billion dollars in new investment, a signal of Beijing’s determination to build frontier computing capabilities independent of American technology. Huawei continues expanding its domestic semiconductor ecosystem for advanced computing applications. China’s military is rapidly fielding autonomous systems and intelligent command networks as Xi Jinping pushes the People’s Liberation Army to develop what he calls "new quality combat capabilities," a direct reference to machine-intelligence-enabled warfare. And the White House has formally accused Chinese entities of running industrial-scale campaigns to extract proprietary capabilities from America’s most advanced computing models.
These are not isolated technology stories. Together they confirm what I argued in my recent book, "The New AI Cold War," this competition has entered a new and more dangerous phase.
The Race Is Now About Infrastructure
THE NEW ARMS RACE IS FOR COMPUTE — AND AMERICA CAN’T AFFORD TO FALL BEHIND
The first phase of this competition centered on building better models. The new phase centers on who controls the infrastructure that makes advanced computing possible. Chips, energy, data centers, networking and cloud systems have become the contested terrain. Whoever commands that full technology stack will possess decisive advantages in economic productivity, military capability, intelligence operations and technological innovation.
China appears to understand this better than most Americans do.
Xi Jinping has directed his government and military to treat machine intelligence as an "important strategic handhold" in global technological competition. Beijing’s actions reflect that priority. China is pursuing a comprehensive national strategy that combines state-backed financing, civil-military fusion, domestic semiconductor development and advanced computing deployment across industry and government. The goal is a sovereign computing ecosystem, built on Chinese chips, Chinese cloud services and Chinese models, designed to project power abroad while reducing dependence on the West.
What the Jalapeño Chip Signals
That strategic logic explains why OpenAI’s new inference chip matters beyond the headlines. The announcement is not simply about a faster processor. It is evidence that this competition is becoming vertically integrated. Future advantage may belong not to whoever writes the best software, but to whoever controls the entire chain that powers machine intelligence, from chips and electricity to cloud infrastructure and advanced models. China clearly grasps this principle. The United States is only beginning to respond accordingly.
Stealing Capability Through the Front Door
Perhaps the most overlooked threat in this competition is what the White House formally calls "adversarial distillation."
The concept sounds technical. The underlying reality is not. Foreign actors can systematically extract capabilities from advanced American computing systems through mass queries, coordinated probing and jailbreaking techniques that never require stealing source code. White House science and technology director Michael Kratsios warned in an April memorandum that Chinese entities are conducting "deliberate, industrial-scale campaigns" using tens of thousands of proxy accounts to copy the functional capabilities of leading American computing models and train rival systems from the results.
During the original Cold War, spies stole nuclear and aerospace secrets through human intelligence networks and technical penetration. Today, competitors may capture the same kind of strategic advantage through the front door of a commercial programming interface.
If America develops the world’s most capable computing systems but cannot protect them, our technological edge may prove surprisingly fragile.
The Supply Chain Contradiction
Yet the greatest vulnerability may lie closer to home. America is investing hundreds of billions of dollars in advanced computing infrastructure. Companies are building massive data centers across the country. Utilities are struggling to meet projected electricity demand. States are competing to attract investment.
THE WEST STILL DOESN’T GRASP THE DANGER OF CHINA’S RARE EARTH ENDGAME
All of that sounds encouraging until one examines the supply chain. Many of the electrical components required to support these facilities, including transformers, switchgear and power management equipment, remain heavily dependent on foreign manufacturing, much of it linked to China. These systems also depend on critical minerals and rare-earth elements for which China remains a dominant global supplier. If that hardware depends on foreign suppliers, technological leadership becomes more fragile than most policymakers acknowledge.
This creates a strategic contradiction Washington has not yet resolved. America increasingly recognizes China as its principal long-term competitor. Yet our computing buildout continues to depend upon supply chains vulnerable to Chinese influence. No nation wins a technological competition by relying on its primary rival for the infrastructure that makes that competition possible.
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What America Must Do
Recent policy moves, including expanded semiconductor export controls, increased Pentagon investment in autonomous and decision-support systems and new federal attention to model security, suggest Washington is moving in the right direction. But the pace remains insufficient relative to the threat.
The United States needs secure semiconductor production, reliable domestic energy, resilient supply chains that bypass Beijing, sustained research investment and stronger cooperation with allies who share our concerns about China’s ambitions. Most important, we must recognize that machine intelligence is no longer merely a Silicon Valley story. It is an American power story, with consequences that will outlast every other debate currently consuming Washington.
The first Cold War was won through industrial strength, military resolve, technological innovation and the moral clarity that free societies outperform closed ones. This new Cold War will demand those same qualities.
China’s leaders have already concluded that advanced computing will help determine the balance of power in this century. The United States still holds enormous advantages, but advantages erode when taken for granted. This competition is no longer a forecast. It is underway. Whether America leads or follows may depend on decisions being made today about chips, energy, infrastructure and national resolve. China understands the stakes. The question is whether we do.