Is China About to Produce the Next ‘Sputnik Moment’?

By definition, a “Sputnik moment” is hard to predict. It jolts precisely because it defies expectations. So I may be wrong, but if I had to guess, I would look closely at biotech and energy, two sectors I try to follow more actively than others.

Biotech is still flying under the radar. China has become a global leader in clinical trials and is now a net exporter of original biotech intellectual property. Its research ecosystem has been strengthened by the return of top scientists, some of whom were trained in the West. In areas like gene editing, cell therapy, and synthetic biology, Chinese researchers are contributing at the frontier and publishing competitively. A major breakthrough from this space would likely catch many by surprise, especially those who still associate China with manufacturing rather than invention.

Energy is similar. While China’s dominance in solar and wind is well known, its deeper innovation lies in infrastructure that requires long-term planning and coordination. New-generation nuclear reactors are being built more quickly and safely, with improved efficiency. At the same time, progress in alternative battery technologies points to potential shifts in how grid storage is priced and scaled globally.

In the end, I do not think the next Sputnik moment will come from a single breakthrough or product. More likely, the shock will come from the realization that China is executing across multiple deep tech domains. It is not just doing so quickly, but with increasing coherence and strategic intent. For those still relying on outdated mental models, that recognition may be more jarring than any individual invention.

The next “Sputnik moment” from China won’t roar across the sky; it will hum from a reactor core buried deep in the hills of Sichuan. Here, I’m talking about a more literal source of power: a nuclear reactor. If DeepSeek rattled the U.S. with its unexpected model performance on par with the global cutting edge, China’s next move could shake us not with a single breakthrough, but with an industrial base designed to survive tech competition with the U.S. and thrive in parallel.

The sector to watch is AI. Chinese leaders increasingly recognize that control over AI depends on more than just models. It hinges on chips, energy, data centers, cooling systems, and even power grids.

Small Modular Reactors, or SMRs, in particular. They have long been viewed with cautious optimism in clean energy circles. In China, they are quickly becoming an emerging backbone of the country’s AI infrastructure strategy. The logic is simple: If compute (industry jargon for the infrastructure powering AI) is the engine of AI progress, energy is the fuel. And China wants control over the pump.

For context, the limiting factor for AI is increasingly understood to be not just chips, but the infrastructure needed for model training and inferencing at scale. Model training and inference consume enormous, continuous power. For China, grid constraints, especially on the crowded eastern seaboard, are real. Enter SMRs: compact, carbon-free, and deployable inland, precisely where Beijing is rerouting AI workloads under its “East Data, West Compute” (东数西算, dong shu xi suan) strategy.

And it is not just plans on paper. This year alone, China’s State Council approved 10 new nuclear reactors, the fourth consecutive year it has done so. The country now has 30 reactors under construction, nearly half the global total. In 2023, it flipped the switch on the world’s first operational fourth-generation SMR, claiming 90 percent of the technology was developed domestically. This reflects a broader industrial model that prizes scale, rapid deployment, and practical application over frontier innovation, enabled by streamlined approvals, low-cost state financing, and rising technical capabilities.

Meanwhile, the United States is playing catch-up. Just last month, Donald Trump signed executive orders aimed at accelerating nuclear development, pushing the Nuclear Regulatory Commission to approve new designs within 18 months and setting a goal to quadruple nuclear capacity by 2050. One order floated the idea of sitting reactors on federal land or military bases, including for AI-focused data centers. But execution is the challenge. The U.S. has brought only three reactors online since 1996, and recent builds have faced massive delays and cost overruns.

So what might the “Sputnik moment” look like? Perhaps a frontier AI model, trained end-to-end in a nuclear-powered inland data hub, running on Huawei chips. Or a Belt and Road-style deployment of Chinese-built SMRs powering AI-driven logistics in Southeast Asia or Africa, proof that China can export not just textiles, steel, or iPhones, but the off-grid infrastructure needed to run the future of high tech.

The U.S. remains ahead in frontier innovation. But China is innovating in how to industrialize that frontier, specifically how to engineer cost-effective solutions for AI deployment and commercialization, harden the supply chain, and construct a full-stack ecosystem that is sanction-proof and self-sustaining. Quietly, it is building the scaffolding of its economy for the AI era. When that scaffolding becomes visible, that is when the real Sputnik moment will land. It will not arrive with spectacle, but it may arrive first!

First, prominent Americans have repeatedly raised the Sputnik alarm over Chinese tech breakthroughs. These include: China’s prowess in high-speed rail (President Barack Obama in 2011); 5G (Senator Mark Warner in 2019); hypersonic missiles (General Mark Milley in 2021); and DeepSeek (venture capitalist Marc Andreessen in 2025). The United States greeted the initial Sputnik moment of 1957 with a giant wave of science funding and educational reforms. And every successive call of a “Sputnik moment” slightly cheapens the term, making it somehow less likely that America will deliver a worthy response. So far, the amount of money committed by the U.S. government is not commensurate with the degree of alarm.

Second, America triggered what we might call China’s Sputnik decade through the series of export control actions starting under the first Trump Administration. There’s no doubt that Beijing has had a very heavy emphasis on technological self-sufficiency, which can be traced to the founding of the People’s Republic. And there’s no doubt that Xi Jinping himself values technological self-sufficiency. However, starting in 2017, the U.S. government has demonstrated that it has an at-will power to cripple national champions like ZTE and Fujian Jinhua, which scared the living daylights out of China’s tech companies. They are now fearful of being dependent on American supplies and are more intent on building up the domestic tech ecosystem.

Third, and this is more of a personal view, too many Americans continue to have a complacent view on China’s tech progress. In spite of so many Chinese advances, prominent American legislators still resort to saying that China can only “copy” or “steal.” I would have thought that the gigantic industrial disparities in China’s favor—200 times greater shipbuilding capacity and a projected four times greater overall industrial capacity than the United States by 2030—would shake the American policy and business class into more concerted action to rejuvenate the industrial base. But these efforts are still tentative and quick to fall when political winds shift.

Will any particular Chinese technology advancement really trigger a new Sputnik moment in the United States? I am skeptical. Americans aren’t all that impressed by electric vehicles or drone displays. So long as its elites like Senator Tom Cotton offer lines like “China doesn’t innovate—it steals," then the United States will not be roused into a more competitive mindset.

The next Sputnik 2.0 moment? In the industry I focus on, electric vehicles (EVs) are set to create a “Sputnik market.”

Look for car dealers in San Diego, Phoenix, and San Antonio to begin importing “lightly-used” Chinese vehicles from Mexico and delivering them to American buyers. (In China itself, EV companies are already selling “zero-mileage second hand cars” to get around regulations intended to end price wars.)

Today, America imposes a 147.5 percent duty on new electric cars imported from China, according to data from the U.S. Department of Commerce, a formidable wall that has slammed the doors shut on direct imports from the PRC.

But used car imports from Mexico are subject to only a 25 percent tax.

American dealers buying from Mexico will have plenty of choices. China now exports more cars to Mexico than any other market in the world. Mexican consumers are already driving hundreds of thousands of BYDs, Chireys (Chery’s brand name in Mexico), Zeekrs, Aions, and SAIC-MGs.

A few weeks back, I crossed the border from San Diego to Tijuana and walked less than a mile to a BYD dealership. There, I test drove several impressive new products, including the U.S.$45,000 Shark pickup truck and the $20,000 Mini Dolphin. BYD plans to sell 80,000 cars in Mexico this year, up from nothing in 2020.

While behind the wheel, I asked a BYD sales consultant named Luna about consumer perceptions. “Not a lot of Mexican customers are familiar with the BYD brand,” she told me. “But they get excited when they see the quality they can get at these prices. BYD software is the best in the industry right now—way ahead of GM, Ford, and Toyota.”

I also met with veteran executives from the Mexican industry who said that BYD and other Chinese cars are stunning legacy automakers. Stellantis and GM are losing market share at a rapid clip. Profits are falling fast, too. In the last week of May, BYD cut prices on most of its models sold in China, including slashing the Dolphin Mini sticker to under $8,000. We can expect similar price drops in Mexico in the coming months.

Dealers in Mexico told me that they are barely breaking even on the sales of new Chinese cars. But they do not want to miss out on securing the franchise for the “next Toyota,” so they are even willing to lose money in the short term. “I think dealers in Texas would be disappointed not to have these vehicles in their own showrooms, too,” one said.

It is hard to imagine Chinese cars not finding their way up into Texas, Arizona, California, and beyond. American car buyers would be dazzled by the surprisingly high levels of quality and the advanced technology.

Detroit, on the other hand, would be in a panic.

When Sputnik launched during the Cold War, it shook the American psyche partly because of American overconfidence and partly because of intelligence failure. Many in the U.S. government simply believed that America was inherently superior in technology, while intelligence gathering had gained few insights into the Soviets’ secretive space program.

When DeepSeek shook the American psyche earlier this year, earning its own Sputnik comparison, the situation was quite different. While the ethos of American (over)confidence was very much alive, all of DeepSeek’s AI advancements that led to its “Sputnik moment” were published in papers and the model weights were open-sourced. Yet, hardly anyone in the U.S. paid attention. And when Americans did pay attention, things got blown out of proportion, from viral funny memes to bans.

DeepSeek’s “Sputnik moment” is emblematic of an attention failure in assessing and contextualizing China’s technological advancement. Even though a civilization-scale, Cold War-esque technology rivalry between the two superpowers is consuming a lot of mindshare, the professional opinion-havers of Washington, D.C., Wall Street, and Silicon Valley are paying surprisingly little attention to publicly observable facts.

How could TikTok be a more addictive and engaging social media platform than Instagram? Well, ByteDance acquired an app called Musical.ly, which was already popular among American teens, injected it with more machine learning, then re-launched it as TikTok (and Douyin in China). How could BYD make so many affordable yet well-performing electric vehicles that are outselling Tesla’s? Well, it’s been making EVs since 2003, as long as Tesla has, was making batteries long before that, and its founder, Wang Chuanfu, is a maniacal workaholic who entertains no distraction other than building BYD, unlike his South African-born counterpart. The list of “shocking” innovations that are hiding in plain sight goes on. DeepSeek’s AI models were just the latest example.

Looking ahead, I will name three more potential “shocks” that are already underway in public:

Robotaxis and autonomous vehicles of all types roam the streets in China, due to more favorable regulatory environments and sustained execution from software providers like Baidu Apollo Go, WeRide, and Pony.ai, to just about every domestic EV company and the equipment manufacturers that supply them, plus Tesla’s China team. The Chinese autonomous driving stack is also being eagerly adopted in the Middle East.

Dark factories—manufacturing facilities that are run 100 percent by robots and other forms of automation thus need no lighting—are steadily coming online and will make more of everything. Xiaomi, the once low-end cheap phone maker turned EV and Internet-of-Things juggernaut, is leading the way.

Safer and more abundant nuclear energy production, led by Shidaowan, the nuclear power plant in Shandong that became the first in the world last year to apply fourth-generation technology that is both safer and more versatile (it does not use water cooling, and thus can be built inland). Abundant energy production has major implications for future AI advancement, where energy availability not GPU performance is the limiting factor. In other words, Shidaowan is much more important than DeepSeek.

Attention failure in the U.S. means that these developments are likely to surprise the pundit class. At the core of this problem is a nagging psychological hurdle: How is the country that used to make our sneakers and toys, then our fridges and iPhones, able to make anything more advanced than what we tell them to?

The original “Sputnik moment” pushed Americans out of complacency and catalyzed decades of technological advancement and improved STEM education. It is unclear if DeepSeek or BYD or anything else can have the same catalyzing effect, until China is seen for what it is, not what the U.S. remembered it to be.

China’s next Sputnik moment is already happening: It’s Huawei’s Cloud Matrix 384 (CM384) rack, a cluster of chips for AI processing that matches or beats Nvidia’s best product (albeit with worse energy consumption).

CM384 is so effective because it makes use of China’s strength in power generation. Whereas grid growth in the U.S. was flat between 2000 and 2022, China has effectively doubled its power generation capacity over the last decade. CM384 makes up for the relatively lower memory and memory bandwidth of China’s chips by using more energy.

And there is nothing stopping China’s relentless power expansion. China has advanced nuclear power generation capabilities, abundant coal and solar resources, a hardened transformer and electrical infrastructure, and is set to add significantly more power generation capacity in the next 10 years. China has added a U.S.-sized grid since 2011.

Together with the country’s growing chip manufacturing capacity, and the use of techniques to maximize the efficiency of less advanced chips as shown by DeepSeek, China could feasibly start pushing the frontier of AI progress.

Better drone swarms, robotics, and best-in-class LLMs (large language models, like DeepSeek, ChatGPT, etc.) could all be a result of the adoption of CM384.

If China announces a new frontier-leading AI capability in the next 12 months, it will almost certainly be because of CM384. CM384 might not be a Sputnik moment yet, but it could be the equivalent of the Soviet Union’s R7 rockets that carried Sputnik into orbit.

The world marveled when infant KJ Muldoon was saved by the first personalized gene-editing-based therapy. But no one should be surprised if the next biotechnological breakthrough—be it a new gene-editing-based treatment for Duchenne muscular dystrophy or a lesser known disease like MECP2 duplication syndrome, a new type of oncological biopharmaceutical, or seeds combatting climate change’s effects through drought resistance—comes from China. China has been building its biotechnological strength for decades, honing its funding, talent recruitment, and data generation strategies. Meanwhile, the U.S. seems hellbent on destroying its historic advantages.

Biotechnology addresses multiple Chinese government priorities: food security, population optimization, healthcare reform, big data governance, technological self-sufficiency, and to be a globally influential innovator. Given the field’s resonance across these different goals, building a domestic biotechnology industry has long been important to the Chinese state and its scientific allies. It has been prioritized in almost every major science and technology policy since the 1986 National High-Tech R&D Program.

State funding is essential to biotechnology. Firstly, in contrast to semiconductors where academic research is often distant from the market, biotechnology is powered by basic research. It is the field that normalized academic entrepreneurship, and top firms across the U.S. and China have founders and chief science officers (CSOs) who concurrently hold academic appointments. Key innovations in the industry—like CRISPR as a gene editing tool—emerged in publicly accessible academic journals, while 99 percent of new drugs approved between 2010 and 2019 drew on NIH-funded research.

Secondly, while American government officials want private capital to fill holes left by federal funding cutbacks, the economics of biotechnology make this increasingly unviable. Fields like genomics have changed how we understand disease. Where we once saw a particular form of cancer, we now recognize multiple genetic pathways, each in need of a distinct intervention. This makes treatments more effective, but it renders the potential patient pool ever smaller, so much so that the potential returns often do not offset the risks and investments from private capital required to bring therapies to market without state intervention. Localities throughout China are subsidizing firms commercializing gene therapies for rare diseases.

Biotechnology relies on developing and retaining human capital. While complex fabrication is the chokepoint of semiconductor production, scientists and their ideas are the lynchpin for biotechnological innovation, and researchers are mobile. China has been markedly successful in recruiting biotechnological talent in recent decades. When surveyed in 2018, for example, over 90 percent of Chinese biotechnology firms had a founder, CEO, or CSO who had trained in the U.S. or worked in a major global firm. Scientists I’ve interviewed emphasize how the wealth of resources and opportunity China offers motivated their return. These returnee researchers, in turn, have catalyzed innovation in China’s biotechnology industries.

The U.S. has long been considered the world’s most desirable location for biological research, but recent government actions have severely undermined the retention of top talent. Increasing government surveillance of Chinese and Chinese-American researchers, for example, has caused many to leave for China and other countries.

In addition to public funding and talent recruitment, divergences in how genetic data are conceived and generated also benefit China. The U.S. has historically viewed genetic data only as personal health information in need of privacy protection. In contrast, China has long treated genetic data not only as a form of sensitive personal information, but also as a national natural resource to be harvested, employed in development, and protected from foreign exploitation. Moreover, China’s centralized healthcare provision makes it far easier for Chinese firms and researchers to access sizable, stable, and systematic data than their American counterparts.

These differences matter because the next round of biomedical innovations require compiling and manipulating data sets on the scale of tens of millions of samples as we try to identify and leverage the genetic signaling cascades at the root of different diseases.