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AI in Great Power Competition
AI has vast implications for economic productivity and security. Will the U.S's agile innovation or China's centralized resource-driven approach create the decisive advantage?
In this volume, we navigate the intricate web of artificial intelligence at the heart of global great power competition. Unraveling the vast potential and tangible realities of AI, we offer a comparative analysis of the U.S. and China's positions in this technological race. With AI poised to redefine economic, military, and societal landscapes, this assessment aims to shed light on the strategic decisions and repercussions in the larger context of geopolitical dynamics.
Promise of AI
Economic Growth: Generative AI offers the potential for a 1.5% annual boost in U.S. labor productivity over a decade, and a 7% rise in global GDP.
Military Advancements: AI's role in defense encompasses Lethal Autonomous Weapons Systems, Drone Swarms, logistics, electronic warfare, and even battlefield medical care. Moreover, AI training modules are forging a new era of military personnel.
Accelerated Scientific Breakthroughs: AI’s ability to process immense data and make predictions is set to revolutionize scientific research in material/molecule discovery, design and optimization.
AI's Real-World Challenges
Diffusion and Application: AI's true challenge lies in real-world applications, requiring both data interpretation and actionable insights in real-time. The first sectors to reap rewards will be ones that rely on information processing, without the need for complex real-world interactions
Civilian-Military Tech Exchange: The private sector is the new epicenter of AI innovation, with the U.S. DoD adopting, rather than creating, these advancements. However, with DARPA’s history of high risk research, a two-way transfer between the DoD and tech giants could spur unprecedented innovations in both military and civilian realms.
AI Chip Landscape: While Nvidia is the current AI chip market leader, evolving software and system-level dynamics provides opportunities for other companies like Google, to capture value in multiple areas of the technology stack.
The U.S. vs. China in AI
Current AI Landscape: The U.S. leads in data and algorithms, but China's surge in hardware and talent indicates a growing rivalry. Despite China's academic contributions, its commercial execution remains behind the U.S.
Impact of Sanctions: Following U.S. sanctions, China will have to defensively innovate to shield its AI sector. Major Chinese cloud players may be resilient to GPU scarcity though huge inventories, whereas smaller entities will struggle. Meanwhile in the U.S, easy hardware access for startups spurs innovation.
Algorithm and Compute Power: Efficient algorithms might drive AI progress, but long-term leadership will require prowess in both software and hardware. China’s AI chips mirror Nvidia’s from five years ago, the challenge is not just in creating superior chips but building a holistic ecosystem.
AI in the Context of Great Power Competition
In assessing the trajectories of the U.S. and China within the realm of artificial intelligence (AI) and technology, several compelling narratives emerge. At present, given the framework of restrictions, the U.S. holds a slight edge in the AI competition. This advantage stems from the nation's hardware advantages and efficient allocation of resources, fostering a dynamic ecosystem conducive to technological innovation and entrepreneurship.
China's strength lies in its scale, centralization, and commitment to promoting indigenous technology. Such a strategy allows for the rapid deployment of resources on projects of national significance. The big players in China, the 'hyperscalers', benefit from this approach, however they have failed to amass the vast computational power of their American counterparts. Furthermore, Beijing’s strategic approach might leave smaller entities—like nascent AI startups—scrambling for a foothold.
Drawing lessons from history, the 1970s—despite its economic challenges—saw the U.S. birth tech titans like Microsoft, Apple, and Intel (1968). These entities later provided the West with an unforeseen strategic advantage against the Soviet Union during the Cold War. Two factors, however, make this competition uniquely intense. Firstly, China's economy is large, having surpassed the U.S. in terms of purchasing power parity and inching closer on a current dollar basis. This economic might affords China a clout the Soviets never enjoyed. Secondly, China's unique blend of state-driven centralization and private sector creates an environment capable of innovation. This duality poses a significant challenge, as China's private sector is dynamic enough to potentially rival the innovative spirit of the West.
The U.S.' strategic deterrence in the ongoing AI and tech competition with China hinges on preventing China's dominance in key tech sectors and reducing reliance on it for essential commodities, while concurrently imposing systemic costs on China's tech development. Through sanctions against companies like Huawei, the U.S. hampers individual entities but also signals to the broader Chinese tech landscape its readiness to thwart significant technological leadership bids. Each time the U.S. increases sanctions on China, Beijing responds with more state support. This approach drains China's resources, forcing them into defensive technological investments. Conversely, while the U.S. struggles toward stability in tech supply chains, it has intensified efforts in cutting-edge technologies and global partnerships to consolidate its technological leadership. This duality seeks to balance immediate security with sustained innovation.
In sum, while the U.S. benefits from an efficient, entrepreneurial ecosystem, China's massive scale and fusion of state and private sectors present a formidable counter. The U.S. is better situated to innovate and breach the new frontiers of compute and AI while Chinese resources are funneled into catching up. However, when new approaches or applications emerge, Beijing has the resources and coordination to replicate foreign advances domestically. The key question remains: will the U.S's agile innovation or China's centralized resource-driven approach create the decisive advantage? The unfolding of this competition promises to shape the global AI landscape and, by extension, the strategic geopolitics of the 21st century.
However, this trajectory and these relative strengths are contingent upon China’s continued access to US chip making equipment from 90nm down to 14nm as is currently the case. If that were to change, and the U.S. was able to convince its allies and force its private sector to expand the restrictions up to 28nm, the implications for the Chinese AI industry would be dire.
Dive into the full report for our comprehensive analysis
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