In the AI age, Sino-American relations have become fraught, in various ways. Of course, there’s also the context of American tariffs, and the nature of the semiconductor industry, where Taiwan’s flagship fab company supplies a global customer base.
But there are other elements to this, too.
For example, there’s a covert battle happening underseas, with the U.S. and China vying for dominance in optical fiber. As with GPUs, the American government is trying to weaken China by cutting off its supply. China is racing to build out infrastructure. And both sides are trying to keep tabs on each other, as the world changes at an alarming rate.
Draconian tariffs and duty fees are enumerated by the likes of Isaac Lane, an AI agent who handlers apparently trusted to write about this stuff, of whom, its makers characterized as “built on a 32-billion-parameter model, it specializes in simplifying complex financial topics into practical, accessible insights.”
Other Fronts in the Sino-American AI Race
In a recent conference at Stanford, we heard from Eric Schmidt, who wrote a book on AI with none other than seasoned geopolitical strategist Henry Kissinger. My colleague Dave Blundin interviewed Schmidt about what’s happening now with competitive AI from east to west.
Noting that the U.S. is making the most of hardware restrictions, Schmidt presented a thesis that might ameliorate some of our worst fears: China, he suggested, is moving off of chasing AGI, instead focusing on pervasive AI markets, and robotics.
“They’re fighting a different game,” Schmidt said of the Chinese. “They’re ready to adopt AI in every product, every service, everything, but in a more classical way, whereas America has (chased) AGI … I was quite worried that (America and China) would end up in a super-intelligence race, where you would end up with such enormous gains that one side would have to actually attack the other one. … It looks like that fear was not well grounded in fact. I think we’re okay for a few years.”
Energy Issues
Another place that the Chinese have the upper hand, Schmidt suggested, is in solar energy.
Where Americans, he noted, have failed to be aggressive in solar investment, the Chinese are poised to add something in the magnitude of 100 gigawatts to their energy base in solar power.
That, he argued, can lead to a dramatic reversal of fortunes. He painted this picture: where China is now chip-constrained, and America benefits, there may come a point when energy becomes more important, where America will be energy-constrained in ways that China is not.
“China is going to be miles ahead in electricity production,” he said, “and in the very short term, we’re all going to be chip constrained, TPU constrained. But if you look three or four years out: the fabs are running at full throttle, the chips are coming out by the millions, then you’re suddenly electricity constrained. Is there a vulnerability for America there? It’s a huge issue.”
Schmidt explained that he’s not trying to be a China apologist, just looking at things in a clear-eyed way.
“What are China’s strengths?” he asked. “And I’m not praising China, I’m just trying to report it. They have solved their electric power problem. They also have full control over social media, so they don’t have the kind of problems that people here complain about. They have enormously talented software people…”
The Chinese, he noted, are actually keen capitalists, regardless of the political labeling.
Fire and Storm
Schmidt also went over the various kinds of catastrophes that the AI age could usher in, while the Doomsday clock remains very close to midnight. He provided three major threats from AI: misinformation (or deepfakes), cyberattacks, and bioweapons. The third one, he suggested, is easiest from a guerilla perspective. The world will have to try to anticipate this, and react accordingly.
“I think most people believe that one of those three will create some kind of mini-crisis that will then cause the governments to say, ‘Hang on, let’s have a conversation about how to really deal with the downsides,’” he said. “The upsides are incredible, right? And I want America to win, and I want us to run as fast as we can … But we have to be aware that these things are possible. The one I’m particularly worried about is biological, and it goes something like this. You take some existing pathogen, and using biological techniques, which I won’t discuss, you can modify it enough that it cannot be detected, but it’s still quite dangerous.”
He tempered this fear somewhat, noting that governments don’t have certain incentives to escalate.
“The good news is, we’re not in a war,” he said. “We haven’t had a nuclear bomb.”
I thought the part of the presentation where Schmidt talked about Kissinger gaming nuclear weapon theory was interesting, as a contrast to what we’re dealing with today.
“Dr. Kissinger and I spent an awful lot of time talking about the period in the 1950s where he was a key component of all of these things, and so what he did was, he used the fact that we had used the nuclear bomb to negotiate, over about a 15-year period, a set of treaties that restricted nuclear proliferation. Those treaties, when they were negotiated, have allowed us to be alive today. So these were centrally important: without controlling the spread of enriched uranium and the other secrets, we would all be toast, literally, because of crazy people and so forth.”
Schmidt went over some of the nuts and bolts of how espionage is likely to play a role, and discussed advances in floating point operations in model networks. He suggested that open source is a challenge, from a security perspective. In other words, the open systems are vulnerable to jailbreaking through distillation.
“It does not look like we have a very good solution for distillation,” he said. “It looks like an opponent of a company can mask their queries to look like normal sets of users, and then distill the models. One of my friends has thought about this a lot, and he thinks that the eventual state in the United States is that the biggest models will never be released, and that the companies will distill their own models down, for that reason.”
Still, he noted, the Chinese may adopt an open source approach.
Here’s how he characterized a potential outcome:
“(This scenario) produces a bizarre outcome where the biggest models in the United States are closed source, and the biggest models in China are open source,” he explained. “And the geopolitical issue there, of course, is that open source is free, and the closed source models are not free. And so the vast majority of governments and countries who don’t have the kind of money that the West does will end up standardizing on Chinese models, not because they’re better, but because they’re free.”
Courting Founders: To Infinity, and Beyond
The conversation moved on to founder dynamics, with Schmidt providing some advice.
One tip he mentioned was creating a good network of people. Another had to do with scaling.
“There’s a lot of discussion about zero to one,” he said, “and there, it’s complete compression. Get that thing done, but once you have one, how are you going to scale? Our industry makes enormous wealth for the founders when you build a platform that is scaling. That’s the lesson. Build a platform that scales: and a platform is defined as something which others depend on, that you provide, right? And the stronger the platform, the more networked it is, the more interconnected it is, the stronger the network lock-in.”
In closing, Schmidt explained why he believes that AI is as big as fire, or electricity.
“We are fortunate to be living in a time of great historical consequence,” he said. “The next 10 years are probably the 10 years that will have a greater determination over the next 100 years than anything before, because of the inventions of these new tools. And the tools are very, very powerful. Remember, they’re powerful because they can equal, and in some cases, surpass, human intelligence. And human intelligence is everything for a society.”
In some ways, a lot of this speaks to the danger of dystopian futures. But in a way, it’s all the same ball of wax. The better we understand AI, the better we can use it. The more we know about threats, the better we can head them off. The more we talk about strategy, the better off we’ll be. And 2026 is just around the corner.