China remains one of the most asymmetric opportunities—and threats—in the world today.

The prevailing narrative has been to dismiss it as “uninvestable.” A land of copycats, real estate bubbles, and stifling state control. Wall Street had largely written it off.

But narratives, like markets, shift. And the new narrative is that America is no longer the only game in town when it comes to groundbreaking tech.

I believe the US is still the beating heart of global innovation. But you must understand the competitive threat Chinese companies now pose to your portfolio.

Below are three key areas where China is racing ahead—and what it means for investors.

• This “good enough” AI poses a major threat to big tech…

Amidst all the noise of 2025, the constant signal for investors has been artificial intelligence (AI).

Earlier this year, Chinese company DeepSeek released an AI model that rivals top Western models yet costs 90% less to run than ChatGPT.

Before DeepSeek, the assumption was that only big tech companies with deep pockets could afford to train top models.

DeepSeek showed smart architecture beats brute force. Suddenly, startups with clever engineering could go toe to toe with tech giants.

This evaporated big tech’s “AI premium.” The fact that DeepSeek is open source and free to download is also a big problem for US AI giants.

Until recently, companies like Alphabet (GOOGL) and Microsoft (MSFT) were spending billions to build the best AI, confident they’d earn that money back in AI revenues.

Now, many businesses will choose DeepSeek’s free, “good enough” model instead.

In the short term, DeepSeek turbocharged demand for big tech’s AI cloud services. But if DeepSeek adoption heats up and dents demand for AI models, big tech’s AI spending could end up looking like a giant pile of money on fire.

My friend and Gavekal CEO Louis Gave told me, “The last thing you want to do in life is compete with China. When China enters a room, profits walk out.”

In the West, companies focus on maximizing returns to shareholders. China plays the game of minimizing profits to kill its competitors.

“Hunger Games” capitalism is a threat to your global portfolio.

• The iPhone vs. Android battle coming to EVs.

American muscle cars. Quality German engineering. Cheap Japanese imports. This is what I envision when I think about cars.

Everyone knew China couldn’t produce cars… until electric vehicles (EVs) upended the global auto industry.

Over the past 25 years, auto production in the US, Germany, and Japan has fallen 20%+. Meanwhile, China’s output has surged 1,600%.

Of the 17 million EVs sold globally last year, 11 million were sold in China—more than the rest of the world combined.

Here in Ireland, I hadn’t seen a single Chinese car until recently. Now, BYDs (BYDDY) are everywhere, fresh off the assembly line.

Why? They’re half the price of a Tesla (TSLA). No wonder BYD just outsold Tesla in Europe for the first time.

In the near future, I believe EVs could end up resembling the smartphone market. Tesla will remain #1 in the West—like the iPhone. Meanwhile, China will flood the world with cheap, Android-equivalent EVs.

But cheap doesn’t mean “bad.” In many cases, Chinese EVs are better.

For example, Xiaomi’s SU7 sedan—complete with self-parking and built-in AI—rivals Porsche’s Taycan in performance yet sells for half the price.

And let’s not forget China’s battery market…

CATL, the world’s largest battery maker, controls 40% of the EV battery market. It supplies 16 of the world’s biggest carmakers, including General Motors (GM) and Tesla’s Shanghai factory.

Its latest batteries can reach up to 1,500 km on a full charge. That’s New York to New Orleans without stopping!

When I started looking into the battery market a few years ago, Panasonic, LG, and SK Innovation were vying for the top spot.

Now, CATL captures 90% of the industry’s profits.

Tesla is the only automaker keeping pace with China. That’s because it’s fully embraced robotics and continues to drive down costs.

• China’s real edge isn’t labor—it’s robots.

In 2023, China installed more industrial robotics than the rest of the world combined. And it wasn’t close:

The real edge of “Made in China” isn’t cheap labor. It’s automation.

As Apple (AAPL) CEO Tim Cook said in 2017, “China stopped being a low-labor-cost country many years ago. The reason is because of the quantity of skill in one location.”

In some BYD factories, robots outnumber humans on each shift. Several Chinese firms are also building “dark factories”—fully automated facilities that don’t need lights, or people.

China’s also racing ahead in humanoid robots. A recent image from Bank of America Corp. (BAC) shows a sea of Chinese flags among leading robotics parts makers:

Source: Bank of America

No surprise, as robotics components are often 50%–60% cheaper in China.

Reindustrializing America is a great idea, but tariffs and trade barriers won’t rebuild the Rust Belt. The only way we’ll compete is to out-innovate China.

• Important: This isn’t a “sell America” call…

For the past 15 years, the US was the only game in town when it came to disruption investing. US companies dominated all the most important innovations.

Now, there’s a new bull market in Chinese innovation… but I want to stress that this isn’t a “sell America” call.

With China leading many innovations, I believe it’ll force America to move fast to stay competitive.

Most investors are overlooking this duel dynamic: A rising China and a re-energized America. That’s where our big opportunity lies.

It’s time to consider whether a small slice of China belongs in your portfolio… before the crowd catches on.

Stephen McBride is Chief Analyst, RiskHedge. To get more ideas like this sent straight to your inbox every Monday and Friday, make sure to sign up for The Jolt, a free investment letter focused on profiting from disruption. Click here to join thousands of smart investors reading The Jolt every week.