AI Started a New Storm in Geopolitics 

As the AI market matures, there is a stark realization in public sectors elsewhere that this is America’s AI world.

Photo of AI apps on an iPhone
Photo by Solen Feyissa via Unsplash

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

You can just picture Sam, Elon, Satya, and Jensen in a Silicon Valley karaoke joint somewhere belting out that ‘80s classic: We are the world. 

While governments try to wrap their heads around how to legislate for the Brave New World the US tech industry has thrust upon them, they’re also jostling to grow domestic AI industries. As the AI market matures, there is a stark realization in public sectors elsewhere that this is America’s AI world — the rest of us just live here.

If You Can’t Beat ‘Em, Incentivize ‘Em

Reining in Big Tech means different things in different countries, of course. In China, the Great Firewall is being maintained, more or less. Starting July 9, developer access to ChatGPT will be cut off in China, and domestic rivals are flocking to fill the Sam Altman vacuum. Slightly further down the sliding scale of governmental control is the European Union, which passed the AI Act in March and recently told Meta to stop scraping people’s Facebook data (oh, Meta!) to train its large language models. But EU member states are keen to set themselves up as an AI hub — especially France, which CNBC reports is vying with ex-EU member the UK to attract AI investment.

Keegan McBride, an adjunct senior fellow at the Center for a New American Security and a lecturer at the Oxford Internet Institute, told The Daily Upside that as states figure out what kind of leash they want to put on AI software, they’re also frantically competing for the industry’s favor:

  • McBride said as states’ public sectors become increasingly digitized — and thereby more dependent on private American companies — the handiest part-way solution is to build data centers on their own turf, where they can exercise a degree of control. “You’re going to see states competing to have data centers within their territories, competing for investments, you’re going to see them engaged in regulatory innovation,” he said.
  • Ultimately, McBride thinks the math doesn’t really really add up. “France has tried to build a sovereign cloud in the past that didn’t work. The economies of scale just don’t match up,” he said.

Crucially, the US is home to the world’s “hyperscalers” — i.e., companies that can build out cloud infrastructure — a market that more or less shakes out as just Amazon, Microsoft, and Google.

Taking Sides: In a December 2023 report, Goldman Sachs identified the “geopolitical swing states” for AI development as the UK, the UAE, Israel, Japan, the Netherlands, South Korea, Taiwan, and India. Goldman theorized these states may make alliances with “more powerful states” (read: the US and China) to further their own AI advancement. Right now the US has a head start, with Chinese tech giants like Huawei hampered by US trade restrictions on semiconductors, per The Information.