The nature of global rivalry has undergone a profound transformation in the twenty-first century. What once centered on territorial conflicts, military alliances, and economic sanctions is now taking place in the realm of technology, with artificial intelligence (AI) playing a significant role and emerging as a defining force. Beyond its revolutionary effects on several sectors, AI has emerged as a crucial indicator of influence and power, altering the nature of global rivalry. Its incorporation into national security, economic policies, and social governance has transformed it into a strategic asset that no major power can overlook or deny.
At the heart of this transformation lies the rivalry between the United States (U.S.) and China. As the world’s two leading superpowers, both countries have been caught up in a strategic contest vying for technological supremacy, heralding a new chapter in global power dynamics. As both countries push forward to lead the field of AI, they are turning it into a critical battleground with far-reaching implications that extend beyond technology, influencing security, governance, and the very fabric of international relations.
The growing competition between the U.S. and China in AI is not just reshaping bilateral relations but also redefining the global balance of power. The pursuit of AI supremacy is accelerating geopolitical rivalries, shifting alliances, and setting new standards for technological dominance. As AI development becomes increasingly linked to national security and economic strategy, its influence extends far beyond these two superpowers, compelling nations worldwide to adapt to a rapidly evolving and uncertain international landscape. Hence, this insight examines the far-reaching implications of this AI race, shedding light on its role in reshaping global power structures and influencing future geopolitical trajectories.
AI as the Ultimate Strategic Asset and the New Battlefield in Geopolitics
Emerging as the ultimate strategic asset of the twenty-first century, AI has significantly altered the landscape of global competitiveness, shifting the very foundations of power dynamics. Historically, the key pillars that defined state power and intensified geopolitical rivalries were military strength, economic dominance, and territorial expansion.[1] For centuries, states pursued these pillars with relentless determination, striving to secure influence, outmaneuver their rivals, and assert their dominance, leaving no stone unturned in their quest for maximum security and power. Today, however, that is no longer the case. With the emergence of AI, geopolitical rivals are putting technological capabilities at the center of their national strategies.[2]
Seen as a vital and transformative asset, AI offers states the potential not only to assert dominance on the world stage but also to strengthen their military capabilities and accelerate economic growth.[3] Perhaps this is what truly sets AI apart as the ultimate strategic asset: its ability to further enhance a nation’s defense system, optimize economic operations and influence global policymaking. Nowhere is this more evident than in the realm of defense. Nations excelling in the AI race and applying it in their defense systems are gaining a strategic advantage in national security, from autonomous warfare to sophisticated cyber defense.[4]
The ongoing Russian-Ukrainian conflict gives a striking example of AI’s impact, where Ukraine’s use of cutting-edge technology, provided by Western nations, has enabled it to hold its ground against its far larger rival, Russia.[5] This proves that asymmetric battles fueled by cutting-edge technologies ranging from drones to autonomous cars can level the playing field in conflicts with major powers and provide nations with a competitive edge in military capabilities.[6] It is also important to note that the effects of AI go well beyond the battlefield. In a world increasingly vulnerable to cyber threats, AI also emerges as the frontline defender against numerous waves of cyberattacks.[7] It has the capacity to identify, anticipate, and eliminate these threats, enhancing states’ defense strategies.
AI is critical not only to the defense of countries but also to their economic growth. According to studies, AI is poised to contribute greatly to bolstering a developed nation’s economy.[8] Countries that harness AI’s potential to process and analyze vast amounts of data can revolutionize their national industries, enhance decision-making on a policy level, and stimulate innovation.[9] Beyond optimizing existing economic systems, AI enables nations to create entirely new markets and industries, strengthening their economic resilience and boosting their global competitiveness.[10] Thus, in an era where economic power rivals military strength as a measure of geopolitical influence, AI has become the cornerstone of national strategies. It is the force transforming countries into leaders of a new geopolitical order, reshaping the balance of power in ways the world is only beginning to grasp.
This transformative power of AI, however, is also intensifying and fueling a new wave of geopolitical rivalries. Recognizing the transformative potential of AI in achieving economic advantage, military strength and influence over global norms and standards, states are now engaged in a fervent race to outpace each other and lead in AI’s development and application.[11] In their pursuit of supremacy, nations are enhancing their technical prowess while simultaneously altering global power structures, inciting conflicts and alliances that will shape the future of international relations.[12] As the competition for AI leadership continues, it pushes geopolitical rivalries to new heights where the stakes extend far beyond technology itself.
The U.S.-China Rivalry: A Case Study in AI Competition
The U.S.-China rivalry is perhaps the clearest example of how AI is intensifying global competition and how it’s emerging as a critical battleground in global geopolitics. Recognizing that AI is not merely an innovation but a strategic necessity that has the potential to reshape state power, enhance military strength, and ensure economic dominance, both China and the U.S. have been competing fiercely to lead in the field of AI and adopt it within their systems.[13] They have both channeled vast amounts of resources into AI’s development, vying for dominance in ways that impact multiple domains.
With AI emerging as a transformative force in the global economy, both China and the U.S. are racing to leverage its potential for driving economic growth, revolutionizing industries, and solidifying long-term economic supremacy. China in particular has made technological innovation central to its economic ambitions, doubling its efforts in AI as its competition with the U.S. intensifies.[14] In 2017, through its Next Generation AI Development Plan, the Chinese Communist Party declared AI a cornerstone of its economic transformation strategy, aiming to position AI as a fundamental catalyst for economic change by 2025 and establish China as the global leader in AI by 2030 to challenge and surpass the U.S.[15]
To achieve these ambitious goals, China has made rapid advancements and significant investments in its AI capabilities. It invested heavily in research, development, and infrastructure to support AI-driven industries. The government has prioritized sectors such as smart manufacturing, autonomous vehicles, healthcare, and financial technology, viewing them as key drivers of economic growth and global influence.[16] With such ambitions and investments, China is determined to stay ahead in the global race and challenge its rival for leadership.
In recognition of China’s accelerating progress, the U.S., on the other hand, intensified its efforts in integrating and developing AI technologies to secure its economic position. Under the National AI Initiative Act of 2020, it focused on bolstering the nation’s AI capabilities by prioritizing five key objectives: enhancing investment in AI research, optimizing federal AI computing and data resources, setting technical standards, building a robust AI workforce, and fostering international collaborations.[17] Through these efforts, the U.S. aimed to lead in AI innovation, ensuring its dominance in both the technological and economic arenas.
Moreover, the U.S. imposed a range of trade restrictions, export controls and tariffs on Beijing in an effort to obstruct China’s AI and technological progress. With such measures, it aimed to limit China’s access to critical AI-related technologies, particularly advanced semiconductors essential for AI development.[18] In addition, by imposing strict regulations on chip exports and blacklisting several Chinese AI firms over national security concerns, the U.S. sought to weaken China’s technological progress while reinforcing its own dominance in the sector.[19]
However, despite these efforts, China is still catching up with the U.S. in the process of manufacturing semiconductors. The country’s rapid innovation in this space and its efforts in the reprogramming and production of chips to boost its performance challenge the effectiveness of the sanctions put forth by the West. This is especially evident in the recent breakthrough of China’s large language model (LLM), DeepSeek, which was released on 20 January. This Chinese AI startup caught a lot of people by surprise with its performance and cost ratio. It was released by China and has already surpassed models from prominent U.S. AI companies such as OpenAI and Meta, despite being smaller, more efficient and far less expensive to train and operate. This has shocked markets and demonstrated China’s ability to outmaneuver its rivals even with the restrictions posed on it by the U.S.[20]
This strategic use of economic and technological barriers highlights the intensifying competition between the two powers, with each nation racing to dominate and lead the field of AI.
AI’s potential to revolutionize military strategy and enhance defense systems has also heightened the tensions between both China and the U.S., with both countries viewing AI as a crucial factor in enhancing their military capabilities and securing a competitive advantage in global power relations. The U.S., for instance, with the aim of maintaining its technological superiority in modern warfare and surpassing China’s military capabilities, ramped up its efforts to integrate AI into its defense system. As part of its National Defense Authorization Act, it allocated about US$717 billion for defense.[21] Much of this budget, in fact, has been channeled as investments into the research and development of AI-driven technologies such as autonomous vehicles for logistical support and battlefield mobility, drones for surveillance and tactical operations, and robotics for both logistics and combat.[22] By integrating AI into these technologies, the U.S. is working to enhance its strategic position and preserve technological leadership amid global competition, especially with China.
As a response, China adopted a similar yet more aggressive approach to the U.S., particularly in enhancing its naval capabilities. Following the footprints of its rival, China focused heavily on developing and investing in AI-driven autonomous systems such as advanced drones for surveillance and combat missions and robotic platforms to enhance battlefield operations and decision-making processes.[23] In fact, analysts estimate that China’s annual military expenditure on AI is in the “low billions” of U.S. dollars, a funding level that is comparable to the Pentagon’s efforts.[24] However, China has gone a step further in its capabilities by incorporating AI into its naval operations in the South China Sea, utilizing autonomous submarines, smart mines, and surveillance drones to observe and perhaps counter foreign military actions.[25] With such investments, China is reshaping its approach to modern warfare and asserting its strategic influence against its biggest rival, the U.S. This rivalry underscores the high-stakes competition between both countries and will likely define the global balance of power in the coming years.
The Global Ripple Effect: How the U.S.-China Rivalry Shapes the World Order
The escalating rivalry and tension between the U.S. and China are not merely a bilateral struggle but a catalyst and a transformative force that is fundamentally reshaping the global order. From geopolitics to technology, the ripple effects of this rivalry are reaching far beyond the two major powers.
One of the most striking consequences of this competition, for instance, is fragmentation or what one may call the polarization of the global landscape, which is also shaping the very fabric of international relations among states. With the intensified rivalry between China and the U.S., smaller nations in particular often find themselves caught in the middle, navigating the complex challenges of balancing ties with both superpowers.[26] In fact, many are compelled to align with one side over the other, driven by economic dependencies, technological aspirations, or strategic needs. This alignment is causing the global AI ecosystem to fragment as nations gravitate toward distinct spheres of influence.[27] This proves that in this high-stakes race, AI is not just a technological battleground but also a catalyst for reshaping the global order and redefining the dynamics of cooperation and competition on the world stage.
But beyond traditional alliances lies an even more profound dimension of this rivalry, which is the global race for technological supremacy. AI is not only a two-way race between the U.S. and China, but in fact, various countries have recognized the potential AI holds and as a result are now positioning themselves as key players in the pursuit of AI supremacy to further assert their sovereignty.[28] Countries like the UK, Canada, France, Singapore, India, South Korea, and Israel have all emerged as significant contributors in the field of AI. Russia has also aspired to be a leader in AI and has attempted to use it to influence operations in the West. However, the conflict in Ukraine, along with the U.S. sanctions, has impeded its advanced initiatives. Hence, while China and the U.S. dominate global AI power rankings, other nations are also aspiring to lead in the field and are devising strategies to close the gap.[29] This underscores how AI and the race between both China and the U.S. are altering the global power structure and pushing smaller nations to make strategic decisions that will impact the future of international relations.
The ongoing AI race between the U.S. and China has also developed into a critical fault line that has the potential to significantly alter the very fabric of global stability and security. While both countries are striving to outdo each other by developing sophisticated and potentially lethal AI-driven weapons and heavily weaving them into defense systems as part of their military strategies, they are posing a serious threat to global stability and security.[30] This is because their competition over such technologies risks a miscalculation and an unintended escalation, which may break out into a conflict, given that the deployment of AI in military contexts can lead to unpredictable outcomes and misinterpretations. Such an escalation could ripple across the globe, causing a devastating effect not only on the two immediate parties involved but also on the broader international community.
Conclusion: Lessons from the U.S.-China Rivalry
The competition between China and the U.S. in the realm of AI highlights the significant influence that technology wields in shaping international power dynamics. As these two nations compete for dominance in AI, they are not merely enhancing technology but instead are reshaping the core elements of geopolitical strategy, economic rivalry, and global security. The lessons learned from this rivalry highlight the necessity of rethinking how innovation is approached in the twenty-first century. Leadership in AI requires more than technological advancement; it demands the creation of a global framework that promotes collaboration, balances power, and safeguards humanity. The choices made today will shape whether AI becomes a catalyst for global progress or a point of contention, and the responsibility to guide this transformative force lies with the global community, ensuring it serves the common good.
[1] Acheampong, Richmond, “AI’s Global Impact: Reshaping Power, Security and Economics,” Modern Ghana, January 9, 2025, https://www.modernghana.com/news/1370469/ais-global-impact-reshaping-power-security.html.
[2] Cohen, Jared and George Lee, “The Generative World Order: AI, Geopolitics, and Power,” Goldman Sachs, December 14, 2023, https://www.goldmansachs.com/insights/articles/the-generative-world-order-ai-geopolitics-and-power.
[3] Sherman, Justin, “Why U.S.-China AI Competition Matters.” JSTOR, 2019. https://www.jstor.org/stable/resrep19970.6.
[4] Marr, Bernard, “The Geopolitics of AI,” Forbes, September 19, 2024,
https://www.forbes.com/sites/bernardmarr/2024/09/18/the-geopolitics-of-ai/.
[5] Ibid.
[6] Shuichi, Kurumada, “War in Ukraine Highlights Importance of Cutting-Edge Technology in Conflict,” Institute of Geoeconomics, December 12, 2022, https://instituteofgeoeconomics.org/en/research/2023010543032/.
[7] Marr, Bernard, “The Geopolitics of AI.”
[8] Sherman, Justin, “Why U.S.-China AI Competition Matters.”
[9] Szczepański , Marcin, “Economic Impacts of Artificial Intelligence (AI),” European Parliament, 2019, https://www.europarl.europa.eu/RegData/etudes/BRIE/2019/637967/EPRS_BRI(2019)637967_EN.pdf.
[10] Ibid.
[11]Esposito, Mark, “Around the Globe, Governments Lean into AI,” The Atlantic, https://www.theatlantic.com/sponsored/google/governments-ai/3969/., Accessed January 31, 2025.
[12] “The Geopolitics of Generative AI,” Brookings, July 19, 2023, https://www.brookings.edu/events/the-geopolitics-of-generative-ai/.
[13] Hine, Emmie, “US–China AI Competition at the Crossroads between Dialogue and Decoupling,” East Asia Forum, September 14, 2024, https://eastasiaforum.org/2024/09/14/us-china-ai-competition-at-the-crossroads-between-dialogue-and-decoupling/.
[14] “Technology and Consumer Product Opportunities and Risks: U.S.-China Emerging Tech Competition,” USCC, 2024, https://www.uscc.gov/sites/default/files/2024-11/Chapter_3–U.S.-China_Competition_in_Emerging_Technologies.pdf.
[15] Zhu, Samantha, “Transforming Industries with AI: Lessons from China’s Journey,” World Economic Forum, January 23, 2025, https://www.weforum.org/stories/2025/01/transforming-industries-with-ai-lessons-from-china/.
[16] “Technology and Consumer Product Opportunities and Risks: U.S.-China Emerging Tech Competition,” USCC, 2024, https://www.uscc.gov/sites/default/files/2024-11/Chapter_3–U.S.-China_Competition_in_Emerging_Technologies.pdf.
[17] The White House, “Artificial Intelligence for the American People,” Trumpwhitehouse.archives.gov, https://trumpwhitehouse.archives.gov/ai/executive-order-ai/.
[18] Dohmen, Hanna, “Assessing China’s AI Development and Forecasting Its Future Tech Priorities,” Atlantic Council, September 18, 2024, https://www.atlanticcouncil.org/content-series/strategic-insights-memos/assessing-chinas-ai-development-and-forecasting-its-future-tech-priorities/.
[19] Lin, Liza and Asa Fitch, “U.S. Further Tightens Chip Restrictions, Adds Chinese Firms to Blacklist,” The Wall Street Journal, January 15, 2025, https://www.wsj.com/politics/national-security/u-s-further-tightens-chip-restrictions-adds-chinese-firms-to-blacklist-d7fff3a8.
[20] Choudhury, Prithwiraj (Raj) , Natarajan Balasubramanian, and Mingtao Xu, “Why DeepSeek Shouldn’t Have Been a Surprise,” Harvard Business Review, January 30, 2025, https://hbr.org/2025/01/why-deepseek-shouldnt-have-been-a-surprise.
[21] Abadicio, Millicent, “Artificial Intelligence in the US Army – Current Initiatives,” Emerj, May 28, 2019, https://emerj.com/artificial-intelligence-in-the-us-army/.
[22] “AI at War: The Next Revolution for Military and Defense,” Capitol Technology University, August 4, 2023, https://www.captechu.edu/blog/ai-war-next-revolution-military-and-defense.
[23] Yuan, Shaoyu, “China Leans into Using AI − Even as the US Leads in Developing It,” The Conversation, August 21, 2024, https://theconversation.com/china-leans-into-using-ai-even-as-the-us-leads-in-developing-it-236557.
[24] Harper, Jon, “China Matching Pentagon Spending on AI,” National Defense, January 6, 2022, https://www.nationaldefensemagazine.org/articles/2022/1/6/china-matching-pentagon-spending-on-ai.
[25] Yuan, Shaoyu, “China Leans into Using AI − Even as the US Leads in Developing It,” The Conversation, August 21, 2024, https://theconversation.com/china-leans-into-using-ai-even-as-the-us-leads-in-developing-it-236557.
[26] Borish, David, “The Geopolitics of AI: Navigating the US-China Rivalry in the Age of Intelligent Machines,” Linkedin.com, April 22, 2024, https://www.linkedin.com/pulse/geopolitics-ai-navigating-us-china-rivalry-age-machines-david-borish-hrtpc.
[27] Ibid.
[28] Buccino, Sara, “The Global AI Race: Unveiling the Competition for Technological Superiority and Unraveling the Latest Developments,” Tango Project, June 12, 2023, https://tango-project.eu/articles/global-ai-race-unveiling-competition-technological-superiority-and-unraveling-latest#_ftn1.
[29] “Geopolitics of Artificial Intelligence,” Lazard, 2023, https://www.lazard.com/research-insights/the-geopolitics-of-artificial-intelligence/.
[30] Graylin, Alvin Wang, and Paul Triolo, “There Can Be No Winners in a US-China AI Arms Race,” MIT Technology Review, January 21, 2025, https://www.technologyreview.com/2025/01/21/1110269/there-can-be-no-winners-in-a-us-china-ai-arms-race/.
