Jefferies Warns of Massive US AI Capital Destruction Amid Chinese Open-Source Model Surge

Jefferies analyst Chris Wood raised an alarm about the long-term viability of US artificial intelligence spending, warning that the AI boom could result in massive capital destruction as cheaper Chinese open-source models erode market share. The concern centers on a fundamental mismatch: US hyperscalers are projected to spend $695 billion on AI infrastructure in 2026 and $870 billion in 2027, yet Chinese open-source models—developed at a fraction of the cost—are rapidly capturing market share and outperforming many U.S. offerings on key benchmarks.