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July 4th, Bastille Day, now is the time to be patriotic. This week we mix AI and politics and investigate how technology is shaping geopolitical relations.

People love writing about countries’ AI strategies

Recently there has been a surge of writing about countries’ strategies towards AI. People put nice timelines together, write nearly 7,000 words on the topic and argue over who is leading or losing the race. To save you the time of reading these articles, the EU and China have announced enormous AI investment plans while the US leaves AI investment to the free markets.

We could spend significant amount of time ranking countries on where they stand, but I believe the bigger issue here is that technology is shifting global politics and relationships, with AI being one of the core reasons. This includes everything from protecting AI assets from foreign acquisition, embargoes on certain hardware and limiting the talent migration to other countries.

Let’s dive into protecting AI assets

While the US doesn’t have an official AI policy, the unofficial AI policy is “We aren’t sharing.” President Trump blocked a semiconductor deal between Singapore based Broadcom (which is now technically US based) and Qualcomm and cited national security reasons for turning the deal down. This continues a trend that started with the Obama administration (see, I am being bipartisan) where the US blocked Intel in 2015 from selling their most sophisticated chips to Chinese supercomputer builders.

Foreign minority stakes in AI related companies are starting to raise suspicion. China has close to 20 venture capital firms operating in the US and that is worrying the US government. Congress is finalizing legislation that could block state linked funds from taking minority ownerships in sensitive technologies, further isolating outside investment. The “do not share” policy is gaining traction worldwide as both France and the UK have setup up reviews for their AI companies being acquired by foreign firms. Google’s acquisition of UK based DeepMind would most likely have gotten turned down in this environment.

Quite simply, the message is if you are trying to buy a foreign firm with anything to do with AI, you are out of luck. The message may soon become, if you are looking to buy any foreign technology, you may also be out of luck. As China and the US are in a race to develop a quantum computer, I wouldn’t be surprised if the US blocks China from using any quantum technologies developed in the US.

Then there’s Taiwan

Or the Republic of China, depending on what part of the world you live in. The important thing to know about Taiwan is that it manufactures a lot of semiconductors. When I say a lot, I mean around 20-30% of all the semiconductors in the world. The leading chip manufacturer, a company called Taiwan Semiconductor Manufacturing Company (notice how they don’t call themselves The Republic of China Semiconductor Manufacturing Company…ok, too political), accounts for 55% of foundry production (essentially makes the chips that other firms design) and manufactures chips for companies like Nvidia, Xilnix, Qualcomm, and Altera, all companies developing specialized AI chips. Google hasn’t said who produces its new TPU, but rumors point to Taiwan Semi. Even Bitmain, one of the largest crypto hardware producers, utilizes Taiwan Semis plants.

China isn’t good at making semiconductors. This was actually the name of a Bloomberg article: Why Can’t China Make Semiconductors. China has decided to address this issue by making semiconductors one its top priorities in its “Made in China 2025” policy and according to Credit Suisse, China has set aside up to $140 bn for semiconductor manufacturing. But once again, we run into the protectionism issue. Some analysts have speculated the US could block companies from selling semiconductor manufacturing materials to China.

As more advanced chip manufacturing capabilities are developed, Taiwan will most likely become more of a political battle, especially if this Made in 2025 initiative doesn’t work out. Turmoil could quickly escalate in the region if Trump decides to stop honoring the “One China Policy.” I wouldn’t be surprised if Trump starts making more trips to the region as part of an escalating trade war.

Could technology alliances be formed?

If one country becomes the leader in AI, I could envision scenarios where countries decide to pool their AI resources together to counter the threat. Maybe new provisions for NATO are written to include stipulations for how and when AI technologies are used. But with trade wars brewing and NATO alliances souring (ok, maybe all of this is the US’s fault…) the future of how cutting edge technology is shared and who it is shared with is wide open.

The world is a scary place.

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