Welcome to the AI Diplomat Series end-of-week roundup, where we dive into the latest developments in critical cyber security concerns surrounding AI platforms and the geopolitical race for AI dominance. This week, we explore the intensifying competition among global powers in artificial intelligence, the recent investigative findings on the 2023 hack on OpenAI, and a deep dive into China's strides in AI development, specifically highlighting SenseTime's latest advancements.
Cyber Security Concerns on AI Platforms
As AI platforms become more integral to national security and economic infrastructure, the criticality of cyber security cannot be overstated. The 2023 hack on OpenAI serves as a stark reminder of the vulnerabilities inherent in these advanced systems. Recent investigations have shed light on the sophisticated tactics used by attackers to breach AI networks, highlighting the need for robust security measures to protect sensitive data and maintain the integrity of AI operations.
The Geopolitical AI Race: A High-Stakes Contest for Global Dominance
The race for AI supremacy is intensifying as nations recognize the strategic advantages conferred by advanced artificial intelligence capabilities. This competition transcends mere technological prowess, encompassing a broader quest for dominance in global economics, defence, and societal influence. Significant investments from Microsoft, Amazon and Google across the globe especially in Australasia via the deployment of wide scale AI dedicated data centres and the new generation of GPU factories propelled by Nvidia, underscore this trend.
Nvidia, now among the "magnificent seven," has achieved record revenues, highlighting the fierce competition between Taiwan, China, and the US. Taiwan Semiconductor Manufacturing Company (TSMC) reported exceptional second-quarter results for 2024, with revenue reaching a record high of TWD673.5 billion ($20.7 billion), a 40% year-over-year increase driven by robust demand for their 3nm and 5nm chips.
Tech-Economic Race
Analysts at JP Morgan suggest that TSMC's strong performance is bolstered not only by Nvidia's demand but also by an uptick in orders from Apple due to higher iPhone sales. This dual boost from two tech giants underscores TSMC's critical role in the global semiconductor supply chain.
The increased demand from Apple, following the release of new iPhone models, has significantly contributed to TSMC's optimistic outlook for overall 2024 revenue growth. This dynamic highlights how consumer electronics and cutting-edge AI technologies are intertwined in the global market, driving growth and innovation in semiconductor manufacturing.
Future of AI Investment in China
China is not lagging in this race, with companies like SenseTime, backed by tech giants Tencent and Alibaba, making significant strides in AI investment. SenseTime has unveiled the SenseNova 5.5, a multimodal AI model that rivals OpenAI's GPT-4, showcasing China's growing capabilities in AI technology.
Alibaba and Tencent have announced they are heavily investing in AI startups, providing cloud computing credits and other resources to foster innovation. Charlie Dai, vice-president and principal analyst at tech consultancy Forrester, stated that Alibaba was "facilitating the start-ups by offering a public cloud platform with comprehensive capabilities boosted by its broad ecosystem for their open-source models," all the while generating new revenue for its cloud business by furnishing computing resources to train their models. This investment structure mirrors those of Microsoft and Amazon, whereby AI startups utilise funds to train and operate models on Azure and AWS servers, respectively.
In China, computing-for-equity offers hold more appeal, given the scarcity of cloud resources due to US restrictions on advanced chip exports. “Providing compute is actually more valuable than cash,” noted a Chinese AI scientist.
“With the shortage of semiconductors, it’s very hard to get access to a 10,000 GPU [processing] cluster, which Alibaba has.” Meanwhile, social media group Xiaohongshu is pursuing an innovative investment approach by offering increased traffic for the startups’ products through promotions on its popular Instagram-like platform in exchange for equity.
Concurrently, global players Apple, Google and OpenAI are expanding their platforms, with AI-powered innovations in upcoming devices such as the iPhone 16 Pro, with “Apple Intelligence” and the Google Pixel 9 series pushing “Google Gemini” as an eventual replacement to google search. These developments not only fuel consumer interest in AI but also raise the stakes in navigating the complexities of open-source restrictions and geopolitical relationships. The strategic moves by these companies are a testament to the massive investments being funnelled into AI research and development, aiming to outpace rivals in critical areas such as machine learning, autonomous systems, and data analytics.
This relentless drive for AI dominance underscores the importance of AI in shaping future global power structures. As nations and corporations compete for leadership in AI technology, the implications extend far beyond the tech industry, influencing economic policies, military strategies, and international relations. The race is not merely about developing cutting-edge technology but about positioning for future influence and control on the global stage. This high-stakes contest underscores the critical role of AI in defining the contours of 21st-century geopolitical and economic
OpenAI 2023 Hack: Unveiling The Fallout
In a significant revelation, it was disclosed that OpenAI experienced a security breach on July 4, 2023. A hacker gained access to the internal messaging systems of OpenAI and lifted details about the design of the company's AI technology from discussions in an online forum. While the hacker did not penetrate the core systems housing the AI models, the breach raised significant concerns.
OpenAI executives decided not to publicise the incident, believing that no customer or partner information had been stolen and that the hacker was a private individual without ties to foreign governments. This decision to withhold information from the public and law enforcement, including the FBI, has sparked controversy and debate within the industry.
The implications of this breach extend beyond immediate security concerns. It underscores the behaviour of corporate boards making unilateral decisions on cyber security parameters, especially when AI systems are linked across hundreds of millions of devices globally. The incident remained undiscovered until 2024, raising questions about transparency and accountability.
Leopold Aschenbrenner, an OpenAI technical program manager, argued that the company was not doing enough to prevent foreign adversaries from stealing its secrets, leading to his departure from the company. This breach has significant ramifications for the broader AI industry, highlighting the tension between corporate decision-making, national security, and global competitiveness.
Geopolitical Tensions And OpenAI's China Ban
Geopolitical tensions have reached new heights with OpenAI’s recent decision to block its services in China. While ChatGPT was already blocked by China's government firewall, developers could previously circumvent restrictions using VPNs to access OpenAI's APIs. Now, with OpenAI taking additional steps to block API traffic from unsupported regions, the ban is enforced from both sides.
An OpenAI spokesperson confirmed, "We are taking additional steps to block API traffic from regions where we do not support access."
This move, effective July 9, has caused significant concern within China’s AI community. Xiaohu Zhu, the founder of the Shanghai-based Centre for Safe AGI, remarked, "The decision raises questions about equitable access to AI technologies globally." Rising tensions between Washington and Beijing have led the US to restrict exports of advanced semiconductors to China, which are crucial for training cutting-edge AI technology, thereby pressuring other segments of the AI industry.
However, the ban has also created opportunities for domestic Chinese companies like SenseTime and Baidu. These companies are capitalising on OpenAI’s exit by offering free tokens to attract displaced users. For example, Baidu recently offered 50 million free tokens for its Ernie 3.5 model at the World AI Conference in Shanghai. This competitive landscape could accelerate the development of Chinese AI companies, who are already in fierce competition with their U.S. counterparts.
According to a survey by SAS and Coleman Parks Research, 83% of Chinese respondents use generative AI compared to 65% in the U.S. Additionally, the United Nations World Intellectual Property Organization reported that China filed 38,000 generative AI patents between 2014 and 2023, significantly outpacing the 6,276 filed in the U.S.
China's AI Advancements: SenseTime's Breakthrough
In the realm of AI development, China continues to make significant strides, with companies like SenseTime leading the charge. This week, SenseTime's founder and CEO announced that their latest AI model, SenseNova 5.5, has surpassed five of eight key metrics in AI performance. This achievement marks a notable milestone in the AI field, showcasing China's commitment to becoming a global leader in artificial intelligence.
SenseNova 5.5's advancements are set to impact various sectors, from smart city applications to healthcare and autonomous driving. The model's success in key performance metrics demonstrates not only technical prowess but also the potential for widespread practical applications. As these developments unfold, they contribute to the broader narrative of global competitiveness and geopolitical manoeuvring in the AI domain.
Microsoft and Apple Step Back from OpenAI Board Amid Antitrust Concerns
In a significant move this week , Microsoft has relinquished its observer seat on OpenAI's board, a decision closely followed by Apple. This development, reported by Financial Times, Bloomberg, and other sources, underscores the growing regulatory scrutiny over the influence of major tech companies in the burgeoning AI sector.
Microsoft's decision comes after it acquired a non-voting observer position in November 2023, following a turbulent period marked by the brief removal and reinstatement of OpenAI CEO Sam Altman. Their $13 billion investment had solidified their partnership, which Altman once described as “the best bromance in tech.”
Regulatory bodies in the US, UK, and EU have been closely monitoring Microsoft's significant investment in OpenAI, raising concerns about its potential control over the AI startup. Although EU regulators exempted the partnership from merger regulations, the UK and US authorities remained apprehensive about Microsoft's influence.
In response, OpenAI has bolstered its governance structure, appointing new board members such as Dr. Sue Desmond-Hellmann, Nicole Seligman, and Fidji Simo. These governance enhancements rendered Microsoft's observer role unnecessary, prompting their withdrawal. This move is seen as part of a broader effort to assuage regulatory fears and preserve OpenAI's autonomy.
The exit of Microsoft from OpenAI's board has initiated a strategic shift within the AI company regarding partner engagement. Under the guidance of newly appointed CFO Sarah Friar, OpenAI intends to set up regular stakeholder meetings with key partners like Microsoft and Apple, alongside investors such as Thrive Capital and Khosla Ventures.
This strategy aims to maintain robust relationships with strategic partners while addressing regulatory concerns. OpenAI has expressed gratitude for Microsoft's confidence in the company's direction, signalling a commitment to preserving their successful partnership despite the changes in formal oversight. Apple's similar decision to forgo an observer position highlights a broader industry trend of mitigating antitrust concerns and maintaining independence.
The Big Picture
When discussing mainstream conversations around AI, it's clear that multiple factors are vying for supremacy. Safety concerns, job and employment impacts, global competitiveness, and geopolitical stakes all intersect as policies are crafted and the industry evolves. The delicate balance between fostering innovation and ensuring ethical and secure AI development remains at the forefront of these discussions.
As we continue to monitor these dynamic trends, the AI Diplomat Series remains committed to providing in-depth analysis and insights into the global forces shaping artificial intelligence and digital defence policies. Stay tuned for more updates and expert commentary on the ever-evolving landscape of AI.
