Introduction to Generative AI and Geopolitics
Generative AI is reshaping global competition and geopolitics, presenting challenges and opportunities for nations and businesses alike. Senior figures from Boston Consulting Group (BCG) and its tech division, BCG X, discussed the intricate dynamics of the global AI race, the dominance of superpowers like the US and China, the role of emerging “middle powers,” and the implications for multinational corporations.
AI Investments Expose Businesses to Increasingly Tense Geopolitics
Sylvain Duranton, Global Leader at BCG X, noted the significant geopolitical risk companies face: “For large companies, close to half of them, 44%, have teams around the world, not just in one country where their headquarters are.” Many of these businesses operate across numerous countries, making them vulnerable to differing regulations and sovereignty issues. Duranton also pointed to the stark imbalance in the AI supply race, particularly in investment. Comparing the market capitalisation of tech companies, the US dwarfs Europe by a factor of 20 and the Asia Pacific region by five.
Benchmarking National AI Capabilities
Nikolaus Lang, Global Leader at the BCG Henderson Institute – BCG’s think tank – detailed the extensive research undertaken to benchmark national GenAI capabilities objectively. The team analysed the “upstream of GenAI,” focusing on large language model (LLM) development and its six key enablers: capital, computing power, intellectual property, talent, data, and energy. Using hard data like AI researcher numbers, patents, data centre capacity, and VC investment, they created a comparative analysis. Unsurprisingly, the analysis revealed the US and China as the clear AI frontrunners and maintain leads in geopolitics.
The US and China: AI Superpowers
The US boasts the largest pool of AI specialists (around half a million), immense capital power ($303bn in VC funding, $212bn in tech R&D), and leading compute power (45 GW). Lang highlighted America’s historical dominance, noting, “the US has been the largest producer of notable AI models with 67%” since 1950, a lead reflected in today’s LLM landscape. China, the second AI superpower, shows particular strength in data—ranking highly in e-governance and mobile broadband subscriptions, alongside significant data centre capacity (20 GW) and capital power.
The Middle Powers: Europe, Middle East, and Asia
Beyond the superpowers, several “middle powers” are carving out niches. The EU holds the third spot with significant data centre capacity (8 GW) and the world’s second-largest AI talent pool (275,000 specialists) when capabilities are combined. The Middle East (UAE & Saudi Arabia) leverages strong capital power via sovereign wealth funds and competitively low electricity prices to attract talent and build compute power. Asia (Japan & South Korea) invests heavily in R&D, with government support fostering both supply and demand.
The Geopolitics of Generative AI: Strategy and Sovereignty
The geopolitics of generative AI is being shaped by four clear dynamics: the US retains its lead, driven by an unrivalled tech ecosystem; China is rapidly closing the gap; middle powers face a strategic choice between building supply or accelerating adoption; and government funding is set to play a pivotal role, particularly as R&D costs climb and commoditisation sets in. As geopolitical tensions mount, businesses are likely to diversify their GenAI supply chains to spread risk.
Conclusion
The race ahead will be defined by how nations and companies navigate the intersection of innovation, policy, and resilience. As the global AI landscape continues to evolve, it is crucial for businesses and governments to stay informed and adapt to the changing dynamics of the AI ecosystem.
FAQs
- Q: What is the current state of the global AI race?
A: The US and China are currently the clear AI frontrunners, with the US retaining its lead and China rapidly closing the gap. - Q: What are the key factors driving the AI race?
A: The key factors include capital, computing power, intellectual property, talent, data, and energy. - Q: How are middle powers like the EU, Middle East, and Asia positioning themselves in the AI race?
A: These regions are leveraging their strengths, such as capital power, talent, and existing tech ecosystems, to carve out niches in the AI landscape. - Q: What role will government funding play in the future of AI?
A: Government funding is expected to play a pivotal role, particularly as R&D costs climb and commoditisation sets in. - Q: How can businesses navigate the geopolitical risks associated with AI investments?
A: Businesses can diversify their GenAI supply chains to spread risk and stay informed about the evolving AI landscape and regulatory environment.
