Last month the Trump administration forced AI company Anthropic to shut down two of its most powerful models because of national security concerns. It’s now lifted the ban, but while attention has been on the US, China has released an AI model that rivals the most advanced American offerings at a much lower price. Today, ABC finance expert Alan Kohler on what that means the tech bros in Silicon Valley. Featured:  Alan Kohler, ABC finance presenter and columnist Subscribe to ABC News Daily on the ABC listen app.Program:More from ABC News DailyAustralia, China, United States, AI, National Security, Cyber Security, Information Technology Industry, InternetTranscriptSam Hawley: Last month, the Trump administration forced AI company Anthropic to shut down two of its most powerful models because of national security concerns. It's now lifted the ban, but while attention has been on the US, China has released an AI model that rivals the advanced American offerings. Today, ABC finance expert Alan Kohler on what that means for the tech bros in Silicon Valley. I'm Sam Hawley. I'm Gadigal Land in Sydney. This is ABC News Daily.Sam Hawley: Alan, there has been a huge stir in the US because the Trump administration effectively banned one of the most advanced AI models we've ever seen. Now that's Anthropic's Fable 5.News report: Anthropic says it will abruptly disable its most advanced AI models for all users after the US government ordered it to suspend access for foreign nationals without being given specific details of the national security concern.Sam Hawley: Now though, it's overturned that ban. Just tell me what was the concern in the first place?Alan Kohler: Well, Fable 5 was a version of Mythos, which was sort of half released a while ago. And the problem with Mythos was that it was strikingly good at computer security tasks, hacking capabilities or something. And so it was deemed to be too dangerous. Now, Fable 5 is supposed to be a version of Mythos with more guardrails so that it's not quite as dangerous. But I think the Trump administration firstly wanted to check it out before it released it. But also, Trump signed an executive order that requires new AI models to be approved by them for 30 days before they release it. But I think underlying all this is America's concern about China and the competition between American AI and Chinese AI.Sam Hawley: And the interesting thing about all of this is that while all this is going on in the United States, bans are put in place, then they're taken away. China has been releasing models that are really rivalling what Anthropic is doing in the United States. Just tell me about this company ZAI and what it's up to.Alan Kohler: Yeah, so that company is listed on the Hong Kong Stock Exchange and it had a series of AI models with the name GLM. The latest came out a couple of weeks ago, GLM 5.2, which is apparently as good as or almost as good as Claude and ChatGPT. In fact, on the GLM website or the ZAI website, there's a graph showing the capabilities of GLM 5.2 versus Claude and ChatGPT and the others, Gemini and so on. So it's apparently better than Gemini, not quite as good as Claude, about as good as ChatGPT.Sam Hawley: Yeah, but the thing is with this GLM model out of China, it's so much cheaper, isn't it?Alan Kohler: Yeah, well, so there's two aspects to the kind of price of it. It's described as open weight, which I understand refers to the weight being available, which is the files, the big digital files that are used to train it. And they can be downloaded as well. Now, it means that companies can download it for free and can embed it in their own operations and they can fiddle with it, you know, change it according to what they need. And separately, the tokens, which are the currency of AI, they're about a sixth of the price of tokens from Claude and ChatGPT.I mean, you could run GLM 5.2 for free on your computer, but you're going to need expensive hardware, apparently. So the whole thing is very much cheaper in general. And so what's going on, it seems, and this is already happening, is that companies who are building or buying agents, AI agents to, you know, do operations and tasks within the company, rather than having those agents only use Claude or ChatGPT, what they call frontier only models, they're now combining them with Chinese ones. And so the agents can choose which of the models are needed for a particular task. And they're being encouraged or sort of programmed to, as often as possible, to use the Chinese ones that are cheap, because companies are finding that their invoices from AI are enormous. Particularly those who are sort of exclusively using Claude or something, they're getting these massive bills for AI, which they don't want to do anymore. They're sick of it. So they're now combining the use of those with Chinese ones.Sam Hawley: Yeah, wow. And these open weight models, what, it means the government can't just come in and cut them off and ban them like we've seen in the United States?Alan Kohler: That's right. And then also, more importantly, the companies or the technology departments can actually, you know, get hold of the digital files and adapt them to their own use, which they can't do with Claude and ChatGPT. So they're much more adaptable and user friendly, apparently, as well as being cheap.Sam Hawley: Yeah. So does that then threaten the business models of the US tech giants?Alan Kohler: Well, everyone's now saying that the frontier only business model is collapsing. So yes, it definitely threatens the business models of Anthropic and OpenAI, they're absolutely under threat. So what they have to do is adapt and change their business models. And what they need to apparently do is to go up market and add different services. They can't just, from now on, sell this kind of basic AI service. They need to do other things. I mean, I do think the whole thing is evolving very quickly. I mean, we're only a couple of years into this whole AI thing. And in particular, it's all developed in 2026. And it's very early days. I don't think we have any idea how this is going to settle down.Sam Hawley: Yeah. What does it mean then, Alan, for the valuations of these US companies, which are just enormous?Alan Kohler: Well, I mean, the only kind of pure valuation we've had is SpaceX, which obviously is not a pure AI company. But certainly in the prospectus, they talked about how AI represents 93% of their future earnings. And so that's a kind of relatively pure idea of what the market's doing. And the SpaceX shares have collapsed. And I think Anthropic and OpenAI, obviously they're not listed, so we don't know what their valuation is doing. But I think it's fair to say that their valuations are falling.Sam Hawley: Wow. Okay. So Anthropic and others, of course, in the United States, they are under pressure by the sound of it from these Chinese companies. But Anthropic, Alan, it has accused the Chinese tech company Alibaba of setting up thousands of fake accounts to harvest the capability of its models.Alan Kohler: Well, yeah, talk about the pot calling the kettle black here. I mean, all these big AI models, they've spent, they've been trained on harvesting everyone else's data. I mean, they've spent years just, you know, basically trawling the internet, collecting everything, and they're being accused of massive degree of plagiarism themselves. And basically what they're doing is selling our own data back to us, reordered and, you know, in a nicely spoken way, in a way that we kind of like to hear. But so look, I mean, I think China is fair to say is going to do what to AI, what it always does when it comes into an industry. And look what they've done in electric vehicles. They've basically come to dominate the global electric vehicle industry and the vehicle industry in general.Sam Hawley: Yeah, and that's cost, right? It's cheaper to buy a Chinese electric vehicle, and it's going to be cheaper in terms of its AI models too. It's the same concept, really.Alan Kohler: Yeah, that's right. And Chinese cars used to be not very good, right? Nobody wanted to buy Chinese cars. But now the Chinese cars are great. I mean, I haven't got one, but I think from what I can tell, I have actually driven a couple just to test drive them, and they're fine. They're really good cars. So it's not as if, you know, you're sort of missing out if you buy a cheap Chinese car. They're pretty good.Sam Hawley: Although there is some security concerns. Well, the Americans are a little worried about them.Alan Kohler: Well, that's true. I mean, look, I think everyone probably needs to be a bit worried about China, but nobody seems to be. I mean, everyone's using TikTok and who knows what's going on there. Yeah, I've started doing some video editing, and there's this Chinese one called CapCut that everyone uses, and there's all these concerns about CapCut harvesting everyone's data as well. So I don't know.Sam Hawley: All right, well, Alan, there is this race, of course, between the United States and China when it comes to these AI models. But history does tell us, right, that if you're winning at the start of a race, you might not actually end up winning at the end of that race. You know, we've seen that with the browser wars, haven't we? Just remind me of that historical moment.Alan Kohler: Oh, the browser wars. Well, yeah, so, yeah, in 1994, Netscape released Navigator, the first really good browser, and it had the field to itself for 12 months, and then Microsoft could see what was happening. So they released Explorer, and then a few years after that, Google could see that there was a real problem if either Microsoft or Netscape embedded some other search engine in their browsers, and so they released Chrome. And because Google was already kind of everyone's home page, they just cleaned them up. So nobody uses Netscape anymore. I think a lot of people use Explorer, but Chrome is the dominant browser. Google came in and wiped the floor with them.Sam Hawley: So these Chinese companies, they could indeed clean up the American tech bros, if you like.Alan Kohler: They could, exactly. And, I mean, I think it's certainly going to shake out in a way that the American companies won't like, and they'll need to really work hard to stay ahead, I think, because the Chinese, you know, you see these statistics about the number of Chinese PhDs, whether it's science or computers and AI and so on, there's just so many more PhDs being churned out by Chinese universities than those in America. I mean, so they've got the talent, you know. There's no reason why they'll fall behind. In fact, they'll definitely, in my view, they'll catch up. So, yeah, I mean, I think that this is going to be really good to watch. We should get out the popcorn.Sam Hawley: Surely we need to keep an eye on this. These tools are so incredibly powerful.Alan Kohler: And the US government is now kind of wanting to obviously get involved. But it's hard to know what they can do. I mean, they're not actually involved in the money, in spending it. They're not involved in directing the industry. All they can do is hold it back, which they don't want to do. They obviously realised by banning Fable 5 they were holding the industry back, so they've unbanned it. And I just think that there's not much the Trump administration can do.Sam Hawley: So then, Alan, in your view, who do you think is going to win this race? And who actually should we be backing?Alan Kohler: Well, yeah, I think it's part of the broad geopolitical picture in a way. I mean, in general, the world is no longer unipolar. You know, it is now a bipolar world, China and the United States. You know, the Middle East war has shown that. I mean, America has really damaged itself and China is kind of taking advantage of it. I think in general, China is positioning itself as an equal of America. And in AI and in, you know, robotics as well, China is kind of in the process of passing the United States. I mean, I saw a chart yesterday of the number of robots that are being released now and the number being released and used in China is a multiple, not just more than in the United States. It's several times the number that are being used in the United States. So China is, you know, well ahead on robots, which people are calling physical AI. And so that's going to be the next and possibly the decisive battle in a way is physical AI, that is to say AI embedded in robots. And I think China is just streets ahead now.Sam Hawley: All right. So all we can do, I guess, as laypeople is sit back and watch this all unfold, Alan.Alan Kohler: Yes, indeed. That's right. It'll be really interesting to watch.Sam Hawley: Alan Kohler is the ABCs finance presenter and columnist. This episode was produced by Sydney Pead. Audio production by Sam Dunn. Our supervising producer is David Coady. I’m Sam Hawley. Thanks for listening.