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What the Machine Learning Value Chain Means for Geopolitics

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Artist's representation of machine learning.

Sophisticated machine learning is driving the growth of artificial intelligence, which some estimates say contributes as much at $2 trillion to the global economy.


Thanks to major improvements in computing power, increasingly sophisticated algorithms, and an unprecedented amount of data, artificial intelligence (AI) has started generating significant economic value. With algorithms that make predictions from large amounts of data, AI contributes, by some estimates, about $2 trillion to today's global economy. It could add as much as $16 trillion by 2030, making it more than 10 percent of gross world product.1

AI's outsize contribution to global economic growth has important implications for geopolitics. Around the world, governments are ramping up their investments in AI research and development (R&D), infrastructure, talent, and product development. To date, twenty-four governments have published national AI strategies and their corresponding investments.

So far, China and the U.S. are outspending everyone else while simultaneously taking steps to protect their investments from foreign competition. In 2017, China passed legislation requiring foreign companies to store data from Chinese customers within China's borders, effectively hamstringing outsiders from using Chinese data to offer services to non-Chinese parties. For its part, the U.S. Committee on Foreign Investment blocked a Chinese investor from acquiring a leading U.S. producer of semiconductors, which are essential components for computing. While this was officially a national security action, it could also benefit U.S competitiveness by protecting its stake in semiconductor production.2

Both data and certain classes of semiconductors are core elements of the AI value chain. Given AI's economic and geopolitical significance, they're also increasingly being considered strategic assets. The extent to which countries can participate in this value chain will determine how they fare in the emerging global economic order and the stability of the broader international system. Indeed, if the gains from AI are distributed in highly variable ways, extreme divergence in national outcomes could drive widespread instability.

So what does the AI value chain look like? And where in the physical world are the key nodes of value creation and control emerging? This article addresses these questions, introducing the idea of a machine learning value chain and offering insights on the geopolitical implications for countries searching for competitive advantage in the age of AI.


From Carnegie Endowment for International Peace
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