Microsoft's Brad Smith Sounds Alarm on China's AI Subsidies

In the global contest to dominate artificial intelligence, Microsoft President Brad Smith suggests American tech leaders have reason for concern. The source of that concern, he says, is the substantial government subsidies flowing to Chinese AI firms.

Speaking from an AI summit in New Delhi, Smith acknowledged the U.S. maintains a lead in access to powerful semiconductors and core innovation. Yet he pointed to China's state-backed financial support as a proven and disruptive force. "We always have to think about, maybe even worry a little bit about Chinese subsidies," Smith told CNBC.

He cited the telecommunications industry, where Chinese companies like Huawei and ZTE, bolstered by state capital, reshaped the global market, pushing some American firms out and placing European rivals on the defensive. Smith warned a similar playbook is now being used in AI. China has established a multi-billion-dollar national AI investment fund, and local governments offer vouchers to slash computing and energy costs for companies.

This support, Smith noted, allows Chinese firms to offer lower-cost AI models, which could prove highly attractive in developing nations. With Chinese data centers already operating worldwide, he argued it would be straightforward for Beijing to extend subsidies abroad. "For the rest of us, we have to compete with that," Smith said, emphasizing the need for effective competition, potentially with government support.

The warning comes as Chinese companies have unveiled a series of new AI models. Analysts like Rory Green of TS Lombard suggest a "China tech sphere" could emerge across developing economies, potentially putting most of the world's population on a Chinese tech stack within a decade. Microsoft, for its part, plans to invest $50 billion by 2030 to spread AI infrastructure and skills in the Global South.