Billionaire investor and Bridgewater Associates founder Ray Dalio is sounding a dire warning: The United States has already lost its competitive edge in manufacturing to China, and there is little chance of reversing that reality. While the U.S. still leads in AI research and development, China has a firm grip on mass production, especially in semiconductor manufacturing. According to Dalio, this dynamic is unlikely to change, and the economic and geopolitical consequences will be significant.
Why the U.S. Can’t Keep Up in Manufacturing
Speaking with Tucker Carlson last month, Dalio bluntly stated that the U.S. is no longer in the game when it comes to large-scale manufacturing. While America is home to some of the world’s most advanced AI chip designs, it struggles to produce these chips effectively, especially when compared to China.
“We design chips, but we can’t produce chips effectively. By and large, we can’t produce things—any manufactured goods—as cost-effectively,” Dalio explained.
In other words, while U.S. companies such as Nvidia continue to push the boundaries of AI chip technology, the actual large-scale production of these chips—and the integration of AI into everyday consumer and industrial products—is dominated by China.
Dalio pointed out that the United States’ strength lies in its research and innovation, not in its ability to produce high-tech goods at scale. He noted that the U.S. benefits from a world-class university system, strong intellectual property protections, and an ability to attract the brightest minds from around the world.
“If we could work well together in that inventiveness—with rule of law working and all of that working—we have those things that are our competitive advantage,” he said.
However, he made it clear that these advantages will not be enough to bring large-scale manufacturing back to the U.S.
“We do not have manufacturing, and we’re not going to go back and be competitive in manufacturing with China in our lifetimes, I don’t believe.”
Dalio’s remarks reinforce a long-standing economic trend: The U.S. has shifted toward a service-based and technology-driven economy, while China has solidified itself as the world’s factory.
China’s Strategy: Low-Cost AI Chips Embedded in Manufactured Goods
Dalio believes that China’s approach to AI will give it a significant advantage in the coming years. Instead of focusing solely on creating cutting-edge AI models, China is aggressively working to embed inexpensive AI chips into manufactured goods—a strategy that will allow the country to flood global markets with AI-driven technology.
“The Chinese play is going to be chips, very inexpensive chips embedded into manufactured goods,” Dalio stated.
By prioritizing affordability and mass production over high-end innovation, China can ensure that AI technology is widely accessible and deeply integrated into everything from industrial robots to consumer electronics.
This strategy is already proving effective. Chinese AI firms such as DeepSeek have begun developing low-cost AI models that are challenging U.S. dominance in artificial intelligence. Dalio pointed out that China is “a bit behind in the chips, but they’re ahead in the applications,” meaning they may not have the most powerful semiconductor technology, but they are better at deploying AI into real-world use cases.
The Consequences: An AI War That “No Country Can Afford to Lose”
Dalio has repeatedly referred to AI as a “war no country can lose,” emphasizing that dominance in artificial intelligence is not just about corporate profits—it’s about national security, global influence, and economic power.
“Winning [the AI race] is more important than profits,” he stressed.
The stakes are high. As China continues to integrate AI into its manufacturing sector, U.S. tech companies are feeling the pressure. When DeepSeek unveiled its latest AI model, which was trained at a fraction of the cost of similar U.S. models, tech stocks plummeted. Nvidia alone saw its market cap drop by nearly $600 billion in a single day as investors worried about whether the U.S. could maintain its AI edge.
Beyond the stock market, Dalio warns that America’s reliance on intellectual property rather than manufacturing could leave it vulnerable in the long term. Even though the U.S. has invested billions in AI research—outpacing China’s spending by a wide margin—China’s ability to rapidly deploy AI at scale could allow it to overtake the U.S. in key technological areas.
According to the Stanford AI Index, the U.S. has invested $67.2 billion in AI research compared to China’s $7.8 billion. However, as Dalio pointed out, research alone isn’t enough to win the AI race—it has to be translated into real-world applications, something China excels at.
“Different entities are going to be ahead in different ways,” Dalio predicted. “We’re going to then be in this world in which there’s competition… and then there’s an attempt to be protectionist or whatever, or to fight those differences. And that’s what the world looks like.”
This suggests that AI competition between the U.S. and China will not be a straightforward battle where one country clearly wins—it will be a complex struggle where each nation tries to protect its technological edge while preventing the other from gaining too much ground.
Can the U.S. Regain Its Manufacturing Strength?
Despite Dalio’s grim assessment of U.S. manufacturing, he does not believe that America is out of the AI race entirely. He acknowledges that the U.S. still has a strong lead in research, top-tier universities, and a legal system that supports innovation.
“What we’re competitive in is that small percentage of the population that is uniquely inventive… The United States dominates in Nobel Prize winners, in inventiveness, in having the best universities, and in creating an environment where innovation can thrive,” Dalio noted.
However, he firmly rejected the idea that the U.S. could bring large-scale manufacturing back in any meaningful way, particularly in competition with China.
“We’re not gonna go back and be competitive in manufacturing with China in our lifetimes,” he said.
Instead of trying to rebuild a domestic manufacturing sector that no longer exists at scale, Dalio believes that the U.S. should focus on what it does best: innovation, talent acquisition, and creating an economic environment that fosters creativity and technological breakthroughs.
The Road Ahead
Dalio’s message is clear: The future of AI and manufacturing will be shaped by China’s ability to mass-produce technology, not by America’s ability to innovate. If the U.S. wants to remain competitive, it must find ways to translate its research advantages into real-world applications—before China solidifies its dominance.
At the same time, his comments suggest that global AI competition will be less about a single winner and more about an ongoing, high-stakes struggle where each nation tries to maintain its edge while preventing the other from gaining too much power.
The question now is whether the U.S. government and private sector will recognize the urgency of the situation and take action—or whether they will continue to rely on outdated assumptions about America’s technological superiority. If Dalio is right, failing to act now could mean that the U.S. never catches up.
