New York: Australia is well positioned to share in hundreds of billions of dollars in US artificial intelligence investment but faces roadblocks in the form of restrictive copyright laws and the Trump administration’s shifting geopolitical strategy.
The warnings come as the NSW and Victorian governments compete for overseas investment, particularly in the energy-intensive data centres that will power the next generation of cloud computing and artificial intelligence.
Data centres have become the hottest commercial real estate as the AI boom picks up pace.
Data centres have become the hottest commercial real estate as the AI boom picks up pace.Credit: iStock
Slow and cumbersome planning systems also threaten to stymie investment. Last week, NSW Treasurer Daniel Mookhey told this masthead his government had identified dozens of private sector investment proposals that would boost the state’s productivity, of which the top 25 were overwhelmingly energy and data centres.
“We need to get these new industries that are making generational-changing investments through our system faster,” he said.
Major investors gathered in New York heard Australia was the ideal “overflow option” for American technology companies looking to invest unprecedented amounts of money in AI infrastructure, with four firms predicted to spend more than $US600 billion ($964 billion) this year alone, mostly on data centres.
“Those numbers are probably already conservative,” said Jared Cohen, president of global affairs at investment banking giant Goldman Sachs. “When we talk about AI, we just continue to underestimate the scale … We’ve never had this much money deployed in such a short period of time.”
Australia was among just 18 countries identified as Tier 1 partners by the Biden administration, alongside the UK, Japan, Canada and European allies, allowing countries to access US advanced technology with few barriers.
Cloud computing and AI require networks of large, energy- and water-intensive data centres. About half the world’s 8000 data centres are in the US, but the US doesn’t have enough powered land to keep pace with its infrastructure needs.
“If the US wants to continue to dominate, it’s going to need some kind of overflow option,” Cohen told a recent summit on US-Australia investment hosted by the Australian Consulate-General in New York. “It’s hard to imagine a better overflow option than a country like Australia.”
However, other speakers warned there were potential roadblocks to Australia realising its share of the US data centre boom. Ryan Brown, head of infrastructure finance at OpenAI, which created ChatGPT, said restrictive copyright and data privacy laws meant companies were likely to look elsewhere in a competitive market.
Unlike the US, Australia does not have a broad “fair use” doctrine, although there are specific purposes carved out under which material can be used or reproduced without infringing copyright.
“There’s also changes with respect to the regulatory framework and legislative front on data privacy and misuse … it’s not entirely clear to us what misuse is, and how that’s categorised, and what requirements are attached to that,” Brown said. “I love Australia, but that creates uncertainty as we try to make capital allocation decisions.”
This was an urgent issue because much of the large infrastructure investment for AI was going to be made in the next three years, Brown told the summit. He did not respond to an email request to elaborate.
Others, however, reported positive experiences building data centres in Australia. Matthew A’Hearn, head of digital infrastructure at Blue Owl Capital, said his firm had invested in a $2 billion data centre in Melbourne, which was “able to be brought to bear in a short time frame”.
Meghan O’Sullivan, a professor at Harvard University’s Kennedy School and former adviser to former president George W. Bush, warned that Australia’s privileged Tier 1 position could be diluted if the Trump administration decided to use top-tier status as a bargaining chip in transactional deals with other nations. That could lead to many more countries being given access to US technology, O’Sullivan said, making for more competitors. “The Middle East, for instance, may well be a competitor to Australia in this regard.”
Cohen agreed nations such as Saudi Arabia, Qatar and the United Arab Emirates,“the geopolitical swing states of the Middle East” that were not historically a major part of the global technology conversation, were now “experiencing once-in-a-generation political mobility” as a result of artificial intelligence growth.
“This is a big competition that’s going to play out over the next decade,” he said. “I think Australia ends up getting a huge geopolitical boost from the US’s own limits in terms of the AI infrastructure that it can build.”
While Australia was well-placed to reap those spoils, “we need data centre diplomacy to make this happen,” Cohen said. “Data might be the new oil, but if AI software needs to run on AI hardware, then it’s nations, not nature that will decide where to build those data centres.”
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Michael Koziol is the North America correspondent for The Age and Sydney Morning Herald. He is a former Sydney editor, Sun-Herald deputy editor and a federal political reporter in Canberra.Connect via Twitter.