The global race in chip development could turn into a fierce cloud business race

If artificial intelligence transforms the global economy, then data centers that train it are actually the factories of the future, and governments around the world see data centers capable of training artificial intelligence as a strategic resource they crave to control, writes the Financial Times.

The use of powerful computing for strategic purposes is nothing new; during the Cold War, the U.S. allowed the sale of supercomputers to the Soviet Union only if they were used for weather forecasting, not for nuclear simulations. These rules were imposed on the requirement that the Soviets accept permanent foreign observers and even submit supercomputer data for analysis to U.S. intelligence agencies.

Like supercomputers, the artificial intelligence systems being developed today have both civil and military capabilities and can optimize food delivery applications, but they can also analyze satellite images and direct drone strikes. It is not unreasonable to bet that control over artificial intelligence data centers will have equally political and economic implications.

All advanced artificial intelligence systems are developed in data centers filled with high-end chips, such as those produced by Nvidia. These same chips are already subject to U.S. export controls, and advanced memory chips could soon be added to that list. Countries like China have received blanket bans preventing them from accessing restricted U.S. chips, so they are now developing their own. Therefore, it would not be surprising if more and more countries want guaranteed access to AI technology through data centers built on their soil.

International Projects

Saudi Arabia and the United Arab Emirates do not hide their ambition to become centers for artificial intelligence development, given the massive investments in data centers. Kazakhstan, on the other hand, wants to build an artificial intelligence data center and train models in its own language, while Malaysia is experiencing a boom in data centers with new large investments from American and Chinese companies.

American cloud computing companies see this lucrative opportunity, just as American diplomats do, because there is no better way to exclude Chinese technology than to involve other countries in your cloud. When U.S. President Joe Biden hosted Kenyan President William Ruto in May, the White House proudly announced that Microsoft is building a large new data center in Kenya to offer cloud computing services.

What the White House did not mention is that Microsoft will develop the Kenyan data center together with G42, a technology company owned by the UAE that has a history of technological partnership with Chinese companies. Earlier this year, Microsoft announced it would invest 1.5 billion dollars in G42.

However, some groups in Washington, according to FT’s reporting, are concerned that deals like this threaten their control over AI technology, and they are also troubled by the long-standing ties between G42 and Chinese tech companies like Huawei. Ultimately, it seems that the chip war could be followed by a cloud war.

Whatever protective measures Washington demands regarding the Microsoft-G42 deal will be seen as a template for future international data center projects. Of course, China will not simply surrender to the U.S. and its allies. Namely, Huawei is doubling down on its efforts to build its own cloud computing business for clients in China and abroad. The head of Huawei Cloud recently stated that China should ‘redirect demand’ from chips and artificial intelligence to the cloud. However, chips, clouds, and data centers are fundamentally interconnected, as long as high-end chips with export controls give cloud computing companies the ability to effectively implement artificial intelligence.