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

The two world powers are competing for everything from the intellectual know-how to design AI hardware and software to the raw materials that power artificial intelligence systems. Both also use government subsidies to stimulate new developments.

Where the US currently has a leading edge is in developing generative AI systems such as large language models (LLMs), according to Frank Long of Goldman Sachs’ (GS) applied innovation office. These models collect existing data and use it as the basis for chatbots such as Open AI’s ChatGPT.

Another advantage for the US is that it can impose export restrictions on high-end semiconductors designed by companies like Nvidia (NVDA), which are in high demand in the AI ​​world. That keeps the development of the most advanced LLMs out of China’s reach for now, Long said.

Nvidia is now one of the most valuable companies in the world due to the rising demand for AI computing power. (Jeff Chiu/AP photo, file) (ASSOCIATED PRESS)

However, China is responding with its own maneuvers. It is restricting exports of gallium and germanium for chip production to the US, while it has also reportedly built a new $27 billion chip fund to support its own major projects.

Fierce competition for AI talent between the two countries intensified last week when the US Department of Justice unsealed an indictment accusing a Chinese national and former Google (GOOG, GOOGL) AI software developer of stealing 500 files of confidential code that the tech stole. Giant uses its supercomputer data centers to train LLMs.

The government alleged that after stealing the intellectual property, the suspect simultaneously started working for competing companies in China.

The allegations “are the latest example of the extent to which affiliates of companies based in the People’s Republic of China are willing to go to steal American innovation,” FBI Director Christopher Wray said in a statement.

‘Horse Race’

The battle for AI’s global supremacy was a hot topic of discussion earlier this month at the Web Summit’s annual technology conference in Doha, Qatar, an event that attracted investors and tech executives from around the world.

AI leaders from the public and private sectors recognized that the US and China currently have the edge. The countries are currently ranked #1 and #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 use the technology for the greatest economic and social benefit over time. For example, Singapore now ranks at number 3 in the Tortoise Index, having risen rapidly in recent years.

A general view shows the financial business district in Singapore on March 19, 2019. - Paris has risen to the top of the world's most expensive city for expats, tied for first with Singapore and Hong Kong according to a March 19 survey naming the capital conflict-torn Venezuela as the cheapest.  (Photo by Roslan RAHMAN/AFP) (Photo credit should be ROSLAN RAHMAN/AFP via Getty Images)

Singapore is climbing the ranks of AI powers. (Photo by Roslan RAHMAN/AFP) (Photo credit should be ROSLAN RAHMAN/AFP via Getty Images) (ROSLAN RAHMAN via Getty Images)

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

Long and his team at Goldman said in a recent white paper that they suspect certain geopolitical swing states – such as the United Kingdom, the United Arab Emirates (UAE), Israel, Japan, the Netherlands and South Korea – may be best positioned to leverage the technology and form AI alliances.

Other Asian countries outside China already have several advantages. Taiwan is home to a pioneering semiconductor manufacturer, Taiwan Semiconductor Manufacturing Company (TSM), which produces 90% of the world’s most advanced semiconductors and 68% of the world’s semiconductors.

Engineers work in a cleanroom at the Taiwan Semiconductor Research Institute in Hsinchu, Taiwan, February 10, 2022. Photo taken on February 10, 2022. Photo taken on February 10, 2022. REUTERS/Ann Wang

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

Japan and South Korea are also home to leading semiconductor manufacturing and design companies, and they are setting aside more government money to fuel AI advancement.

Japan allocated $13 billion to 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 create the world’s largest semiconductor manufacturing center.

Other potential AI hubs could 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 produce leading semiconductors.

An employee makes his way into a laboratory at ASML, a Dutch company that is currently the world's largest supplier of machines for the production of semiconductors via photolithography systems in Veldhoven on April 17, 2018. - They call it

An employee in a laboratory at ASML, a Dutch company that is currently the world’s largest supplier of machines for the production of semiconductors via photolithographic systems. (EMMANUEL DUNAND/AFP via Getty Images) (EMMANUEL DUNAND via Getty Images)

The UAE has a $10 billion fund to invest in modern technologies, while Israel has also attracted billions in private AI investments.

Global power will shift to countries that produce rather than solely consume AI technology, according to Alaa Abdulaal, head of digital foresight at the Riyadh-based multilateral foundation Digital Cooperation Organization (DCO). The group’s mission is to recommend public policies that promote access to technology.

“This cannot be done just by the government itself,” Abdulaal said. “A cooperative approach is needed, where we have the private sector, the public sector and civil society at the same table – all sitting together to come up with the right set of frameworks for AI.”

‘Getting much closer’

Today, most countries have adopted at least a national strategy to develop and protect against the potential risks of AI. And some have paved the way for regulation, though none have been tested in the marketplace.

In March, the EU is expected to adopt new legal restrictions around AI. Earlier this year, the bloc’s member states signed off on 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 UK, and it is unknown whether they will.

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

FILE - President Joe Biden speaks about government regulations on artificial intelligence systems during an event in the East Room of the White House, Oct. 30, 2023, in Washington.  The White House said Wednesday, Feb. 21, 2024, that it is seeking public comment on the risks and benefits of making the key components of an AI system publicly available so that anyone can use and modify them.  (AP Photo/Evan Vucci, File)

President Joe Biden speaks about government regulations on artificial intelligence systems during an event in the East Room of the White House last year. (Evan Vucci/AP photo, file) (ASSOCIATED PRESS)

Britain, for its part, has rolled out a “National AI Strategy” in 2022 and committed around $4 billion in subsidies for chip development. The country has also attracted the third-largest level of private investment in AI, after the US and China.

State subsidies and export bans may not prevail forever as countries compete with each other, says Jihad Tayara, CEO of Evoteq, a Dubai-based company that facilitates public-private partnerships to build AI into public infrastructure.

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

And human capital, along with access to open source models, will matter too.

“Today we are seeing the emergence of open source models that are equivalent in capabilities to the absolute most advanced models in many use cases,” Long said.

Countries that prepare their workforces to develop and implement AI models will gain a significant advantage, Abdulaal said.

“This opportunity cannot be seen unless we have the right people on the ground.”

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

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