# Free Chinese models could win users despite trailing by months

Markdown copy of https://realalpha.app/s/free-chinese-models-could-win-users-despite-trailing-by/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [Eric Schmidt](https://realalpha.app/people/eric-schmidt/) · Eric Schmidt is a former CEO of Google and technology executive. · Scaled Google as CEO through 2011, now runs rocket maker Relativity Space and co-founded Schmidt Sciences.
- Host: [Nicolai Tangen](https://realalpha.app/people/nicolai-tangen/) · CEO, Norges Bank Investment Management
- Show: In Good Company with Nicolai Tangen
- Episode: [Eric Schmidt: Are We Ready for Superintelligence? | Podcast | In Good Company](https://realalpha.app/v/U5YtR3OG5Uo/), Oct 21, 2026
- Moment: 24:03 to 27:17 of the episode (3 min), playing on https://realalpha.app/s/free-chinese-models-could-win-users-despite-trailing-by/; the episode from there: https://realalpha.app/v/U5YtR3OG5Uo/?t=1443

## Quote

> “the vast majority of the world will use the **free Chinese models** rather than the more expensive Western models.”
> — [Eric Schmidt](https://realalpha.app/people/eric-schmidt/) at [25:37](https://realalpha.app/v/U5YtR3OG5Uo/?t=1537) · In Good Company with Nicolai Tangen

## Takeaways

1. Schmidt estimates Chinese models are six months behind.
2. Free models could attract users priced out of Western alternatives.
3. He measures a loss partly by who gains users.

## About this segment

Eric Schmidt estimates Chinese models trail by about six months but warns that free access could give them more users worldwide. For investors, the contest is about distribution as well as model quality.

From “Eric Schmidt: Are We Ready for Superintelligence? | Podcast | In Good Company”, Oct 21, 2026. [Watch the full episode](https://realalpha.app/v/U5YtR3OG5Uo/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[24:05](https://realalpha.app/v/U5YtR3OG5Uo/?t=1445) Given that both the US and China is embedding AI into all the races, be it the EV weapons, all these things, how can you really regulate those two countries and the competition between them? Well, the industry believes, and I believe, that eventually there will be treaties. When do you think the Chinese models will overtake the American ones? This is the question of the year. I was just in China, and I have a team that does China versus U.S. model valuations.

[24:42](https://realalpha.app/v/U5YtR3OG5Uo/?t=1482) Before I answer the question, it looks like the Chinese are essentially fast followers. There's a technique called distillation, where you basically ask the big model a series of questions, And then with that, you learn enough to think like the big model. It's more or less illegal. And it appears that distillation has been used in Chinese models. And you can tell because if you ask them, they'll show some traits of their train model.

[25:11](https://realalpha.app/v/U5YtR3OG5Uo/?t=1511) It also appears that the Chinese have used chips that they were not supposed to have that have been pilfered or smuggled into China. But that's neither here nor there. It looks like they are six months behind. I don't know that they will get ahead, but I will tell you that if they're six months behind, then we're already losing because their strategy is that the products are free. So if you define losing as users, the vast majority of the world will use the free Chinese models rather than the more expensive Western models.

[25:46](https://realalpha.app/v/U5YtR3OG5Uo/?t=1546) That's a loss, right? And think about it. If you're a poor country, you don't have the money to afford the expensive stuff from Europe in the United States, and I understand that, but you need this stuff. You want it. You want modernity. You're going to use a Chinese model. Yeah. And also after 12th of June, when suddenly you couldn't get access to the best U.S. models, you have to rethink again if you are living outside the U.S., right?

[26:09](https://realalpha.app/v/U5YtR3OG5Uo/?t=1569) Yeah, and my European friends were particularly upset about the banning of Mythos. Yeah, we were upset too. Yes, of course. And you and I, in fact, talked about it, as I remember. and the important thing about about that decision is instead of complaining about the administration which is easy to do why don't we simply say they're still learning right they have a role too they're still learning where the power is i think all of us were surprised at the power of mythos i was i knew it was coming but it's better than i thought it would be and now there's another version coming which looks like it's better than that it looks like the other western models are better than i thought there's a lot of evidence although i don't there may be the classified people know this that glm um which is called shipu uh in china looks like it has similar capabilities

[27:06](https://realalpha.app/v/U5YtR3OG5Uo/?t=1626) but how would we know it's a closed culture for all we know there's some chinese cyber attack group that's busy doing this i don't know that but i suspect it now it looks like um europe has