China Just Shocked The AI Race | Macro Mondays: July 20, 2026

0:00Andreas Steno:Summertime is maybe good, summertime is maybe shit.

0:22Mikkel Rosenvold:Hello out there. Welcome to Real Vision. Welcome to Macro Mondays. My name is Milo Rosemol. I'm your usual host. And I'm joined by the returning Andres Steno, back from vacation in France. How are you, Andres?

0:36Andreas Steno:Good. It's nice to be back. You know, the temperatures here fit my weight a little bit better. Let me just put it like that.

0:46Mikkel Rosenvold:Yeah, and maybe the momentum in markets as well, Andres. Looking decently this morning, Andres. Let's dive straight into the topic on everyone's agenda this weekend. The Kimi scare. I want to get your take on it. You wrote an entire piece on it this morning. Has China taken over the leadership in the AI race? No.

1:07Andreas Steno:Next question. I mean, of course, I think it's the first time that we've seen China leading the race in one subcategory, in the arena AI scoring methodology. But they don't lead the race overall. but they have taken the lead in a subcategory related to front-end coding, which I guess is something that we need to consider, especially when we look at how markets should respond to this because I'm not necessarily sure that I agree with the market takeaways from, say, Thursday, Friday last week. And I basically think the market got this wrong, but we can spend a few minutes on that, Michael.

1:52Mikkel Rosenvold:Absolutely, Andreas. So we had these are the results that Kimi K3, the new moonshot model, was essentially the best out there. This caused a whole wave of panic about China taking over the leadership, driving this. And a lot of confusion, as I saw it on social media and elsewhere, around how do you even play? What does that even mean if China takes over? Who's the losers? Who's the winners from that? So first of all, maybe let's dive. I know you like to dive a little bit into the actual fabric of this. Is Kimi the best model? How much does this matter?

2:28Andreas Steno:So, you know, my preferred third-party provider of, say, artificial intelligence or scoring of artificial intelligence is the provider called Artificial Analysis. And I think we have a chart on the scoreboard from that on page eight. you know again yes if you look at the front end coding from arena ai which is by the way an old spin out of uc berkeley the kim k3 model is ahead of clock fable for example but if you look at it on text which is basically the broadest use case for many it is still behind which is what you would expect right and if you look at it broadly speaking from this artificial analysis intelligence index, it is also behind both ClockFable and ChatGPT 5.6.

3:19Andreas Steno:So are they ahead? Well, in a niche corner, yes. I guess front-end coding is not the main use case for most users of AI, but it's of course an important use case. And top-down, I think this is the biggest issue for Anthropic. If you look at the average user of Anthropic, they're probably more prone to use CloudFable for front-end coding purposes than the average user of ChatGPT, just to put it in very simple layman terms, right? So in a niche use case, yes, there is an issue here potentially. In a broader perspective, I still see a lot of issues with the notion that China is ahead. Let me just, again, paint a very simple picture on page nine, Mikkel, because what I did was that I looked at the overall scoring of the best Chinese model relative to the best US model on all scoring parameters, right?

4:24Andreas Steno:The artificial analysis index, again. And nothing has changed, basically. What we typically see is that a new flagship model is shipped by Anthropic or OpenAI. The gap opens again. So China is, say, 5, 10 percentage points behind. Then we get a new flagship model from China catching up, but never getting past the frontier parity goalpost. And it's essentially the same that has happened here. The true shocker was when DeepSea got to like 95 percent of the capabilities of the flagship models in the West in early 2025. they've never really gotten anywhere closer than this say five seven percentage points off the frontier model right um i think there's a really really important conclusion hidden in this chart they're always behind and i think there's a reason why they're always behind because they obviously use the frontier models to train their models that would be my best assumption watching this we can get into the weeds of a long technical discussion here that that's not by any means by my intention the point here is that they're always slightly behind and i actually consider this a pretty you know fruitful setup in many ways because if you have someone chasing you like one month two months after right it keeps you very attentive it keeps you very focused on shipping the next model, et cetera, right?

5:55Andreas Steno:So from a hardware perspective, let's start there. We probably need to see the US administration banning the Chinese competition to really take a beating on that hardware trade, in my opinion, because as long as they're allowed to follow the US models with a lack of one or two months, everyone needs to invest still, right, to stay ahead in that race. While if you kind of fence off the competition, I kind of consider that setup a little bit more laid back in a sense where you don't need to be as focused on staying ahead if you start banning competitors right, left, and center. For the record, we haven't seen that yet.

6:41So what I'm trying to say here is that, sure,

6:44Andreas Steno:we probably need to see repricing of Anthropic because of this, due to this is exact front-end coding in each case. I think we need to price hardware higher as a consequence of this. And the very simple reason why it took Moonshot maybe 30, 40 hours to explicitly state that, sorry, guys, we're running out of GPUs. We simply cannot match the demand. And I can assure you that in terms of numbers of users, they are millions and millions of visits after chat gbt and and those models still i mean way way way way behind i think we have that leaderboard on page 11 it's of course not updated up until monday right but but you know in terms of users there is no doubt that the western models have many many more use cases um and therefore if we get some sort of a catch-up uh in in the usage of Chinese models from a user perspective.

7:44Andreas Steno:They need to get hold of some hardware. I know that it's tricky for them to get hold of NVIDIA chips or Hynix chips, et cetera, right, because they're essentially banned. But who knows how they get them. But they do get them to some extent. At least they have managed to historically, right?

8:01Mikkel Rosenvold:So the logic here, as long as the frontier is being pushed, as long as we're getting more productive, more effective also, it might hit the margins and it might hit the market shares of some of the big players like Anthropic and OpenAI. But why on earth should this degrade the memory, the chips story? That's what I don't understand here, Andreas.

8:22Andreas Steno:At least not for now. And I think the market got that wrong last week. But we'll obviously have to see. I think it's a bigger issue for software than hardware for now. If it's actually true that China is able to provide intelligence cheaper, it should increase the hardware demand from the standpoint of something that gets cheaper will see more demand, right? But having said that, I don't think there is, again, watching this leaderboard in terms of users, and you can laugh at Meta AI having 1 ,000 million users, but they do have an incredible distribution base via Facebook, WhatsApp, et cetera.

9:05Andreas Steno:Gemini, the same, right? Most people don't know that they're using Gemini, but they are using Gemini every single day when they use Google search, et cetera. So this distribution embedded in apps, in web pages, et cetera, is second to none. And China obviously does not have that distribution because who's using ByteDance in the West? To some extent, we do use TikTok, but still even the US leg of TikTok is now being put under control of the US government, etc. They're at least trying to keep it away from China. Who's using Tencent apps? If you're a Westerner, you don't do that, right? So all of the consumers are still Westerns.

9:50Andreas Steno:And therefore, I still struggle with this notion that this is going to wreak havoc on the AI race because the distribution will eventually turn out to be equally as important as who's got the best model. I mean, let me put it like this, Mikkel. Do you care whether Gemini 3.0 is the best LLM when you use Google search and you get some LLM results from that? Probably not, right? And no one cares really, right? The average user does not care about the frontier. The average user cares about the flexibility, the agility, and the distribution, right? They want it to work where they are. and they're still using Western apps, et cetera.

10:31Andreas Steno:So in that sense, distribution will be equally as important. And the final point I'd like to make, Mikkel, I know I'm rambling now, but on page 10, again, there are probably other ways of showing this, but if you look at what humans actually prefer to use, so there's a called an ELO rating on this, right, where you actually ask human what they prefer to use, right, which is more of a, you know, of course you can ask a front end coder, do you think Akimi AI or Anthropic AI is the best, right? You probably get a different response from the peer group here. But my point is, you know, having spent countless hours setting up stuff on co-work on my vacation, for example, that user experience is also a really, really important parameter.

11:20Andreas Steno:And when I've, you know, I've tried to gain access to Akimi over the past couple of days, For now, it's basically impossible. But my first impression was that the user experience was not good. And that is probably, in my opinion, the most valuable part of Anthropic. It's not Claude Fable's best model characteristics. It is their user experience, which is a lot better than a lot of the competitors, right?

11:48Mikkel Rosenvold:Absolutely, Andreas. Fascinating stuff here. We will dive a little bit more into this and also obviously take a closer look at the situation. in Iran after a little intermezzo here, Andreas. Did you watch the World Cup final yesterday, Andreas?

12:05Andreas Steno:I tried to watch the whole thing, but I actually fell asleep, and it is the honest answer.

12:10Mikkel Rosenvold:It was horrible. It was horrible. Nevertheless, you asked me to bring along this video, if we can get it played here, of Donald Trump, and obviously the victors. And congratulations to Spain. Let's see if we can get the video played here.

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13:51Mikkel Rosenvold:back well they did and they ran away with everything so big congratulations to Spain it's been an incredible tournament you know Andres I've been incredibly well entertained by this especially especially the latter stages I quite enjoyed all the show around the match yesterday it wasn't what we used to from European matches and tournaments but it was it was quite enjoyable for me it was a little bit bizarre at times but it was quite enjoyable so much more enjoyable than the game anyway so yeah I hope all the listeners from the US enjoyed it it wasn't a tough benchmark to beat but you know what i mean so a quick break in your regular programming if you're serious about your future grab my free report called prepare for 2030 i think you've got five years to make as much money as possible and this guide will help you navigate what's coming

14:37Andreas Steno:the link is in the description download it now having said that mingle um did you notice that you know through that halftime show i don't think there wasn't any american artists present in that halftime show right justin bieber is canadian chris martin is from donna is from england yeah yeah uh um ggs is from his career right yeah about that yeah yeah it's not a single american i was a bit surprised to see that um and you know yeah the chris martin stuff and all of Oh, I hate it. You know, I have a personal rule of myself,

15:17Mikkel Rosenvold:the rule of thumb, the Tom Cruise rule. If you're ever in doubt about which movie to watch, just search for Tom Cruise and you'll end up with a decently good movie. And yeah, for me, that was a real high point. His speech yesterday, I didn't really understand what his point was, but it was really, really good as it usually is with Tom Cruise. So anyway, that was a bit of a high point for us, Andreas. Looking ahead on the week that just started, Andreas, and we'll get back to Iran in a second here. What's the stock that you're watching the most? What's the most important stock to track at the moment?

15:57Andreas Steno:So I don't think we've seen anything like it in momentum stocks than what we've seen over the past two and a half weeks. We're talking about the biggest sell-off in the stuff that has worked so far this year ever in a single month. And this is probably the stuff that we typically see in times of crisis, right? So are we in a crisis? Are the wheels coming off in a way? I mean, that's basically what I'm watching now and what I'm concerned about. I don't think so. But I need to be attentive and vigilant to the risk of this because it's been happening very, very fast. As the Iran war restarted, as we got several triggers for this sell-off of popular trades, it's been incredibly nasty in everything related to the Korean casino.

16:50Andreas Steno:Let me put it like that. As far as Goldman Sachs could count, I think 3 % or 4 % of all Korean adults received the margin call last week. That's incredible. That's the most bizarre stat I've ever heard of. That's incredible. I think 300 ,000 accounts were completely wiped off. So you can put crypto leverage to bed. I mean, they're crazy out there. So I've never seen anything like it. And the buildup during May and June of these levered ETFs in Korea was absolutely bizarre. But it was a little bit difficult to follow that real time. But, you know, we basically know why now, why things moved so fast in the other direction once you got a trigger for a sell-off.

17:39Andreas Steno:So I considered more technical of nature, this whole momentum route, if you will, than fundamental. But we'll have to see because obviously the restart of the war is not good news. And, you know, I can also slowly but surely see that you get a little bit concerned with what's ongoing in Iran. So I'll allow you to unpack that a little bit.

18:00Mikkel Rosenvold:Yeah, I have to say so, Andreas. I mean, we've had eight or nine days of escalations, step by step, a cycle of escalation. We are essentially back to the beginning of the war, more or less. But still, we are at a point where I think the U.S. is struggling to find stuff to bomb. I know that sounds a little bit stupid because Iran is a huge country. The U.S. have claimed on multiple occasions that they have essentially destroyed the Iranian military and the Iranian offensive capabilities. We can see now that that has either been a lie or a complete misjudgment by the US military. Iran is very alive and very kicking, we have to admit.

18:41Mikkel Rosenvold:So it is a very, very tough situation. We are also seeing the attacks spreading. It's no longer focused around the Strait of Hormuz and naval assets. We're seeing renewed attacks on desalination plants, on oil infrastructure, on military infrastructure. And we're seeing increased attacks on the Gulf states, not only U.S. bases in these states, but also directly on infrastructure in Kuwait, first and foremost, but also threats against Dubai and Abu Dhabi and Qatar potentially as well, even though I think they're slightly better positioned. So what's happening here, as I discussed last week in my The Drill article, and I don't know how visible this chart is, But what happened after the Memorandum of Understanding was that the Iranian Republican Guard were essentially the ones that the U.S.

19:34Mikkel Rosenvold:is fighting right now, the IRGC. They took in, by my estimations, at least$2 billion of oil revenue. They control about 50 % of Iran's oil exports. They took in around$2 billion. Some pundits have claimed this is$5 billion to$6 billion. In any case, they took in a lot of money within two to three weeks of the memorandum of understanding. And then things began to revert to the mean when we entered four or five weeks after the memorandum of understanding. And they probably decided, OK, let's restart the war. We've got our war chest filled up again. We can pay wages to our operatives for the next two to three months.

20:18Mikkel Rosenvold:Why don't start all over again? And they have also managed, obviously, to rebuild some of their inventories on missiles and drones. So where does that leave us at the moment? Well, it's a situation where the Iranians, the IRGC, are not really under a lot of pressure to stop fighting. They want to fight. It gives them leverage in the internal power struggle in Iran. The U.S. is obviously fully committed to fighting this out probably for a few more weeks. And the only solution I see right now is still a negotiation. It will probably have to involve China at some more or less obvious level to get this done.

21:02Mikkel Rosenvold:They are the only ones who can truly put the screws on the Iranians as far as I see it. And yeah. Yeah.

21:11Andreas Steno:They've just been accused of, you know, everything last week and that. By Donald Trump. Trump presser, right? So, I mean, it doesn't sound like Trump is, you know, trying to come up with a conciliatory stance versus Beijing to get them involved in this. But I'm not sure how to read that, to be honest, that whole press conference last week.

21:33Mikkel Rosenvold:That's good. I have quite a bit, quite a difference. That was my initial reading as well. Then I read into, what's his name, the Commission on Trade in the U.S. administration, Peter. Jameson Greer. Yeah, no, I don't think it was. Anyway, one of the trade representatives, it doesn't matter, from the Trump administration who said, this is not about China at all. This is not a China story. Well, Donald Trump just spent a whole press conference talking about Chinese interference. Apparently, this is not about China at all. And I think we need to take that at face value. This is all about getting the SAVE Act passed.

22:08Mikkel Rosenvold:And this is all about setting up the scene for the midterms and controlling what happens at the polls at the midterms. So I think they've been sending signals to China from back-channeling and more or less overtly that I know we're talking about China, but this is not about China. And they're so far keeping the September summit alive. And the vibe is okay. they might be able to still work together on oil, hopefully also other issues, but it is a very, very delicate balance right now.

22:39Andreas Steno:So, Michael, can I just add on, you know, you talked about the RGC seizing that window of opportunity to get some oil revenue in. And for example, J.D. Vance explicitly referred to the same. Now we have a 60-day window. We can refill our coffers Then we'll have to see whether they're cooperating, et cetera. So I mean, both sides have basically used that ceasefire to reclaim some territory on oil, if you know what I mean. It also means that the first deadline that we had on the drawdowns of inventories in the West has been postponed. I initially said that late August, early September would be nasty.

23:25Andreas Steno:Now the strategic floor is probably breached, say, between October and November if we keep current flows alive. So right around the midterms timing-ish. Therefore, the US has bought itself another month, month and a half of bombing without too many consequences. So we also seized that moment to take control of the oil flow in a sense. So I guess both sides have some patience now due to the revenue on the IRGC side and the oil transported to the West. All of the stock transiting tankers and all of that got to the West during that window, et cetera. And we'll see that over the coming weeks in the inventory numbers, by the way.