The race for dominance in cloud computing and artificial intelligence (AI) is heating up, and China is pulling ahead with aggressive tactics. If the U.S. doesn’t step up now, we risk losing our technological edge and compromising national security.
Cloud computing is arguably the backbone of today’s AI renaissance, providing essential infrastructure for the training, processing and deploying of today’s most advanced models leveraging the most sophisticated semiconductors available. With over 70 percent of companies adopting AI platforms and 85 percent developing AI applications in the cloud, the U.S. government faces an urgent task: ensuring that high-performing chips are manufactured and deployed by trusted entities and that AI is developed in secure, reliable clouds.
American cloud providers are crucial for AI innovation, yet they face unfair competition from Chinese firms backed by state subsidies and predatory pricing. It’s time for the U.S. to act decisively and reclaim leadership in these critical sectors.
China’s cloud giants, such as Alibaba, Huawei and Tencent, are leveraging state support to offer services at drastically reduced prices, sometimes 20 percent to 40 percent lower; Huawei this year offered as much as 90 percent off its services to help its cloud enterprise grow fast. This aggressive pricing, coupled with low- or no-cost loans from the Chinese government, has enabled them to make significant inroads in developing regions such as Latin America, Africa and Asia. These moves not only undermine American companies but also create dependency on Chinese technology, posing long-term security risks. The rapid expansion of the People's Republic of China (PRC) in cloud services mirrors its advances in 5G, highlighting a strategic push to dominate critical technology sectors.
China's expansion is reshaping the global tech landscape. Over 100 high-end data centers have sprung up worldwide, each handling over a billion parameters essential for AI training. The PRC’s cloud market soared by 16 percent in 2023, with its providers rapidly closing the gap with U.S. giants like AWS, Microsoft and Google. This surge in AI and cloud technologies parallels China's swift 5G advancements.
Despite this, the U.S. maintains a critical advantage in cloud computing through stringent security measures and superior access to advanced chips, essential for AI. Yet Chinese firms are catching up, offering budget-friendly options to economically strained nations. This trend is a mounting threat to U.S. national and economic security.
To address this, the U.S. must implement a robust, multi-faceted strategy:
First, extend the campaign against PRC technology ties to cloud computing by strengthening alliances. Cloud computing underpins numerous emerging technologies, from AI to critical infrastructure, and securing all of them is critical. Collaborating with international partners will enhance security protocols, share vital intelligence and create a unified front against potential threats posed by the PRC’s technological expansion.
Second, challenge foreign data localization and ownership policies that unfairly favor PRC providers. Many countries have implemented these policies, which can limit market access for American cloud companies and create a playing field tilted toward Chinese firms. By engaging in diplomatic efforts, negotiating trade agreements and leveraging international forums, the U.S. can advocate for equitable treatment of American providers, ensuring that markets remain open and competitive.
Third, expand digital assistance programs in developing markets. The Development Finance Corporation can be instrumental in supporting digital infrastructure projects, particularly in regions like Latin America where technological needs are growing. By providing funding and technical expertise, the U.S. can help build robust digital ecosystems that rely on American technology and cloud services, thereby countering the PRC’s influence and fostering economic growth in these areas.
Domestically, ensure U.S. cloud providers maintain their competitive edge. This involves guaranteeing access to high-end semiconductors, which are essential for advanced computing and AI applications. Additionally, U.S. companies must have the necessary resources to innovate, develop cutting-edge technologies, and deploy AI securely. By supporting research and development, enhancing cybersecurity measures and facilitating public-private partnerships, the U.S. can sustain its leadership in cloud innovation and maintain a strategic advantage over international competitors.
China’s rapid advancements in cloud computing and AI directly challenge U.S. dominance. The U.S. must adopt proactive policies to counteract these advancements, support its domestic companies and reinforce its position as a global leader. Failure to act now could cede critical technological ground to a strategic rival, with profound implications for economic and national security.
Klon Kitchen is a nonresident senior fellow at the American Enterprise Institute. He is a 15-year veteran of the U.S. Intelligence Community and was national security adviser to former Sen. Ben Sasse (R-Neb.).
