The AI arms race between the US and China is heating up

Tech billionaires aren’t the only ones fighting for control of AI. The US and China are too.

The two world superpowers are competing with each other for everything from the intellectual know-how to design AI hardware and software to the raw materials that power artificial intelligence systems. Both are also using government subsidies to spur new advancements.

Where the US holds a commanding lead at the moment is the development of generative AI systems such as large language models (LLMs), according to Frank Long with Goldman Sachs’ (GS) office of applied innovation. These models hoover up existing data and use it as the basis for chatbots like Open AI’s ChatGPT.

Another advantage for the US is that it can place export restrictions on high-performance semiconductors designed by companies like Nvidia (NVDA) that are in intense demand across the AI world. That, for now, is keeping development of the most sophisticated LLMs out of China’s reach, Long said.

China, however, is countering with its own maneuvers. It is restricting the export of chipmaking metals gallium and germanium to the US while also reportedly amassing a new $27 billion chip fund to back its own major projects.

The fierce competition for AI talent between the two countries turned up a notch this past week when the US Justice Department unsealed an indictment charging a Chinese national and former Google (GOOG, GOOGL) AI software developer with stealing 500 files of confidential code that the tech giant uses for its supercomputing data centers to train LLMs.

The government alleged that after stealing the intellectual property the defendant began simultaneously working for rival companies in China.

The charges “are the latest illustration of the lengths affiliates of companies based in the People’s Republic of China are willing to go to steal American…