The AI ​​arms race between the US and China is heating up.

Tech billionaires aren’t the only ones fighting for control of AI. There are also US and China.

The two global superpowers are competing with each other for everything from the know-how to design AI hardware and software to the raw materials that power artificial intelligence systems. Both are also using government subsidies to encourage new developments.

Where the US currently holds a commanding lead is in the development of generative AI systems such as large language models (LLMs), according to Frank Long, Goldman Sachs (GS) Office of Applied Innovation. These models hoover existing data and use it as the basis for chatbots like OpenAI’s ChatGPT.

Another advantage for the U.S. is that it could impose export restrictions on high-performance semiconductors designed by companies like Nvidia ( NVDA ) that are in high demand in the AI ​​world. That, for now, puts the development of the most sophisticated LLM out of China’s reach, Long said.

Nvidia is now one of the most valuable companies in the world due to the growing demand for AI computing power. (Jeff Chew/AP Photo, File) (Concerned Institution)

However, China is countering its moves. It is banning exports of chip-making metals gallium and germanium to the US while also reportedly raising a new $27 billion chip fund to back its big plans.

The intense competition for AI talent between the two countries came to a head last week when the U.S. Justice Department charged a Chinese national and former Google ( GOOG , GOOGL ) AI software developer with stealing 500 files of secret code from a The indictment was dropped. The giant uses its supercomputing data centers to train LLM.

The government alleges that after stealing the intellectual property, the defendant simultaneously began working for rival companies in China.

FBI Director Christopher Wray said in a statement that the charges are “the latest example of the long-standing involvement of companies based in the People’s Republic of China.”

‘horse racing’

AI’s battle for global supremacy was a hot topic of discussion earlier this month at WebSummit’s annual technology conference in Doha, Qatar, which drew investors and tech executives from around the world.

AI leaders from the public and private sectors acknowledged that the US and China currently have the lead. The countries are currently ranked No. 1 and No. 2 in Tortoise Media’s Global AI Index, which measures countries based on AI investment, innovation, and implementation.

But leaders also said at the summit that it is too early to know which countries will reap the greatest economic and social benefits from the technology over time. Singapore, for example, is number 3 on the Tortoise Index after rising rapidly in recent years.

Singapore is climbing the ranks of AI powers. (Photo by Rozlan Rahman/AFP) (Photo credit should read Rozlan Rahman/AFP via Getty Images) (Ruslan Rehman via Getty Images)

“I think it’s not going to be as straightforward as a horse race — this person or that person, this country or that country,” Long said. “It’s going to be a full stack with competitors competing for the energy, computing power, data and models needed by AI systems.”

Long and his team at Goldman said in a recent white paper that they suspect some geopolitical “swing states” — such as the United Kingdom, the United Arab Emirates (UAE), Israel, Japan, the Netherlands and South Korea — are best positioned. I can be Tap technology and build AI alliances.

Other Asian countries already have several advantages over China. Taiwan is home to one of the most advanced semiconductor manufacturers, Taiwan Semiconductor Manufacturing Company (TSM), which produces 90% of the world’s most advanced semiconductors and 68% of all semiconductors worldwide.

Engineers work in a clean room at the Taiwan Semiconductor Research Institute in Hsinchu, Taiwan. (Ann Wang/Reuters) (Reuters)

Japan and South Korea are also home to leading semiconductor manufacturing and design firms, and are allocating more government funding to advance AI development.

Japan earmarked $13 billion for the technology in its 2023 budget, up from $8.6 billion in 2022, while South Korea pledged $470 billion over the next 23 years to build the world’s largest semiconductor manufacturing hub. What did

Other potential AI hubs may emerge in Europe and the Middle East. The Netherlands — home to ASML ( ASML ) — is already the world’s only manufacturer of ultraviolet lithography machines, which are needed to fabricate leading semiconductors.

Employed in the laboratory of ASML, a Dutch company currently the world’s largest supplier of semiconductor manufacturing machines through photolithography systems. (Emmanuel Danand/AFP via Getty Images) (Emmanuel Danand via Getty Images)

The UAE has a $10 billion fund to invest in state-of-the-art technologies of late, while Israel has also attracted billions in private AI investment.

According to Alaa Abdul Al, head of digital foresight at the Riyadh-based multilateral foundation Digital Cooperation Organization (DCO), global power will shift to countries that use AI technology rather than just produce it. The group’s mission is to recommend government policies that promote access to technology.

“It cannot be done by the government alone,” Abdulal said. “It needs to take a collaborative approach, where we have the private sector, the public sector, civil society at the same table — all of them sitting together to come up with the right framework for AI.”

‘coming too close’

Today, most countries have adopted, at a minimum, a national strategy to protect against the potential threats of AI. And some have cleared the way for regulations, though none have been tested against market forces.

In March, the European Union is expected to adopt new legal restrictions around AI. Earlier this year the bloc’s member states signaled their agreement with the AI ​​Act, the world’s first comprehensive legislation to regulate the technology.

Federal laws specific to AI do not yet exist in the US or the UK, and it is not known whether they will.

In October, President Biden issued an executive order to encourage secure AI development, including privacy protections. More than a dozen US states have adopted various AI-related laws.

President Joe Biden spoke about government regulations on artificial intelligence systems during an event in the East Room of the White House last year. (Evan Vokey/AP Photo, File) (Concerned Institution)

The UK, for its part, launched a “national AI strategy” in 2022 and committed around $4 billion in chip development subsidies. The nation has also attracted the third-largest level of private investment in AI after the US and China.

State subsidies and export restrictions may not last forever as nations compete, said Jihad Plane, CEO of Evoteq, a Dubai-based company that facilitates public-private partnerships to build AI into public infrastructure. .

“It’s getting very close,” Tayara said of the digital divide, noting that most countries have access to high-speed 5G data capabilities.

And along with human capital, access to the open source model also matters.

“Today we’re seeing open source models emerge that are comparable in capability to the absolute most frontier models in many use cases,” Long said.

Nations that prepare their workforces to develop and implement AI models will have a significant advantage, Abdulal said.

“This opportunity cannot be realized unless we have the right people in place.”

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter. @alexiskweed.

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