Horizon: Technology & Artificial Intelligence, Mid-Monthly Report, September 2026
ARC Group Securities LLC‘s research desk provides independent research for institutional clients, informed by the firm’s experience in cross-border capital markets.
The mid-month report examines how China’s AI labs are winning share of usage by giving their models away, and why the resulting cost is landing on shareholders rather than customers.
What’s in This Report
- Beijing rewards adoption, not capability. State targets measure how widely AI spreads into devices and workflows, not how capable the leading models are, which shapes what Chinese labs build.
- Scarce compute forced an architectural response. Restricted access to advanced chips pushed Chinese developers toward mixture-of-experts models that hold a large system’s knowledge at a fraction of the cost to run.
- Giving the model away is the distribution strategy, not the business model. Open weights win usage share cheaply, but revenue is captured elsewhere, mainly by companies that also own the cloud underneath.
- Usage share is not revenue share. Chinese models have captured up to 46% of tracked token volume, yet openweight models account for under 4% of enterprise spending on one major platform.
- Funding capacity is the variable to watch. Independent labs are covering deep losses through repeated equity issuance and convertible debt, making financing durability a better signal than any single quarter’s growth.
About the Research Desk
The research desk at ARC Group Securities LLC provides research for institutional clients, complementing the firm’s existing capital markets business. The desk is led by David Riedel, who has three decades of experience in research, company analysis, and valuation across Asia and the United States.
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