What Is Microsoft’s (MSFT) New Warning on China’s AI Push?

Microsoft (MSFT) has warned that Chinese AI companies are gaining users faster than U.S. rivals outside North America and Europe, pointing to rising pressure in the global AI race.

In an interview with the Financial Times, Microsoft President Brad Smith said the fight for AI adoption is now driven by lower costs and wider access to AI tools. That dynamic favors Chinese firms in emerging markets, where low-cost and open AI tools are easier to adopt.

Why Chinese AI Is Gaining Ground Globally

Smith said Chinese AI companies benefit from state backing and open models that allow them to compete strongly on price. He noted that China now has open-source systems that are “competitive,” making it easier for Chinese firms to win users in cost-sensitive regions.

Microsoft’s research showed that this trend is already visible across parts of Africa, Eastern Europe, and other emerging markets. Chinese AI start-up DeepSeek has seen strong uptake in several countries, helped by lower costs and simple setup, especially where access to U.S. technology is limited.

A Growing AI Divide Raises Concerns

Smith warned that the gap in AI adoption is becoming a “cause for concern.” Microsoft’s data showed that AI use remains much higher in developed countries than in the global south, increasing the risk of a wider economic gap between regions.

He added that while U.S. companies still hold key strengths, including trust and access to better chips, those advantages alone will not be enough. “You always have to compete on price,” Smith said, stressing the need to stay active in fast-growing regions.

Why Global Reach Matters for Microsoft

While Microsoft leads in enterprise software and advanced AI tools, much of the next wave of AI users will come from outside the West, where affordability matters most. Smith cautioned that if U.S. tech firms pull back from these markets, cheaper platforms could define how AI is used going forward.

In short, the next phase of the AI race may depend less on who builds the best model and more on who reaches the most users.

Is Microsoft Stock a Buy, Hold, or Sell? 

Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 32 Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 14% rally in its share price over the past year, the average Microsoft price target of $631.36 per share implies 32.3% upside risk.

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This article was written by Shalu Saraf and reviewed by Gilan Miller-Gertz.