Microsoft is calling it like it sees it; China is winning the AI race far from Silicon Valley, and it’s doing it with cheap tech and state money, taking control of regions Africa, Russia, Belarus, and many more.
While American firms are still pushing for paid subscriptions and locked ecosystems, Chinese AI tools are spreading fast thanks to open-source models and heavy subsidies.
Brad Smith, president of Microsoft, said DeepSeek’s rapid growth shows how global the fight for AI dominance has become.
“We have to recognize that right now, unlike a year ago, China has an open-source model, and increasingly more than one, that is competitive,” he said. “They benefit from subsidization by the Chinese government. They benefit from subsidies that enable [them] to basically undercut American companies based on price.”
DeepSeek expands into African and sanctioned markets
New data from Microsoft shows DeepSeek’s AI model R1 has taken over in markets where American tech firms have limited reach. The company holds 56% of the AI market in Belarus, 49% in Cuba, and 43% in Russia.
In Africa, it’s the same story. DeepSeek has already captured 18% in Ethiopia and 17% in Zimbabwe, fueled by low costs and no strings attached.
The R1 model launched a year ago and gained traction quickly. According to Microsoft, it helped speed up AI use across the global south by being affordable and easy to access.
That growth has pushed China ahead of the U.S. in global usage of open AI systems, which developers can use, edit, or build on freely. That’s a major difference from how OpenAI, Google, and Anthropic run their tools; those are locked, paid, and built for control.
Smith said poorer countries need help if they’re going to stand a chance.
“If we rely on private capital flows alone, I don’t think that will be sufficient to compete with a competitor that is subsidised to the degree that Chinese companies often are,” said Smith. He called for international development banks and lending institutions to step in and fund data centers and energy costs.
Bright Simons, an AI analyst from Ghana’s IMANI think-tank, said it’s hard to measure DeepSeek’s full impact, but confirmed that Chinese models are now the go-to for many users.
“Africans can’t afford very expensive solutions apart from open source, so you have to go to [Meta’s] Llama or Chinese options,” he said. He also mentioned local tools like Masakhane, built across Africa, and InkubaLM from South Africa.
Microsoft says U.S. tech risks losing AI war without help
The bigger issue, according to Microsoft, is how AI adoption is spreading, and where it’s not. In late 2025, 24% of people in the global north were using AI. That number was just 14% in the global south, with a worldwide average of 16%.
Smith called this a “cause for concern,” warning that if the U.S. doesn’t invest, this divide will grow and so will inequality.
He said the AI divide is now part of the larger battle between the U.S. and China. Microsoft believes the U.S. needs both private investment in training and infrastructure, and public support from governments and banks. “What we do have is, as American companies, a stronger reputation for trust. We have access to better chips than the Chinese companies do… [but] you always have to compete on price,” Smith said.
DeepSeek made waves in Silicon Valley by releasing a strong AI reasoning model that worked well despite needing less compute power. Its next big model is expected to land just before the Lunar New Year.
But Smith also warned that if U.S. tech companies ignore Africa, they’re ignoring the future. “If American tech companies or western governments were to close their eyes to the future in Africa, they would be closing their eyes to the future of the world more broadly, and I think that would be a grave mistake,” he said.
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Source: https://www.cryptopolitan.com/microsoft-says-china-beating-america-in-ai/
