The LSE Phelan US Centre’s AI Essay Competition asked LSE Master’s students to address the question, “Is AI a threat or an opportunity for the US?” In this runner-up essay,Natasha Chávezlooks at the US and China’s AI policies: while the US has long been an AI leader, China has rapidly closed the gap by taking a more centralised and strategic approach, which alongside fewer privacy restrictions, has allowed quicker AI development. She writes that to prevent an AI “brain drain”, and to reduce its vulnerability to foreign semi-conductor supply chains, the US should expand federal AI investment, pursue talent retention policies and balanced regulation, and strengthen domestic chip production.
Artificial intelligence (AI) is no longer just a tool for efficiency, it has become a strategic asset that could determine the next global superpower. In an era where economic growth, national security, and technological supremacy are all connected, AI has emerged as the defining battleground. The United States and China are at the forefront of this race, each fighting for dominance in AI innovation, data control, and regulatory influence. The question is no longer whether AI will shape the future but whether the US will shape AI or fall behind.
A national security imperative
AI is not just an economic driver; it is a national security priority. The US Department of Defence has recognised AI as essential to maintaining military superiority, from autonomous weapons to cyber defence systems. China, however, has made AI central to its military-civil fusion strategy, integrating AI into state surveillance, autonomous combat, and intelligence operations. China’s “New Generation AI Development Plan” aims to surpass the US by 2030, prompting urgent concerns about the implications for cybersecurity, information warfare, and global stability. If the US does not invest in AI research and defence applications, it risks losing strategic ground to its main rival.
Innovation and investment
The US has long been a leader in AI, home to tech giants like Google, OpenAI, and Microsoft. However, China has rapidly closed the gap, fuelled by state-led investments, massive datasets, and a willingness to deploy AI-driven surveillance at scale. While US companies focus on commercial AI applications, China’s government has taken a more centralised approach, strategically directing AI funding and policy. The key challenge for the US is balancing private sector innovation with public investment and national security considerations. If AI research remains fragmented across tech companies without robust government coordination, the US risks losing its competitive edge.
One of China’s significant advantages is its access to vast amounts of data. Unlike the US, where privacy laws limit data collection, China’s government has fewer restrictions, enabling rapid AI model training and development. Additionally, Chinese companies such as Baidu, Tencent, and Alibaba have received substantial state funding, allowing them to scale AI research quickly. In contrast, while the US has superior research institutions and a thriving AI startup ecosystem, it lacks a unified strategy. The absence of a comprehensive AI industrial policy puts the US at risk of falling behind in critical areas such as semiconductors, quantum computing, and AI-powered cybersecurity solutions.
The talent war: a critical weakness?
AI leadership also depends on attracting top talent. While the US remains a hub for AI researchers, restrictive immigration policies and competition from China threaten its dominance. Many leading AI scientists working at American institutions were trained in China, and Beijing is actively working to bring back top researchers through incentives and funding. If the US does not create policies that retain and attract global AI talent, it risks brain drain to China and other emerging AI hubs. Moreover, China has significantly expanded AI education programs at universities, producing a great number of engineers and researchers. In contrast, US universities face challenges in funding AI research at scale, as private companies often draw top academics into industry roles. Government-backed AI fellowships and expanded research grants could be key solutions to maintaining a strong AI workforce.
Ethics and regulation: a double-edged sword?
The US faces another dilemma: how to regulate AI without suppressing innovation. Policymakers must navigate concerns over bias, job displacement, and misinformation while ensuring AI development remains competitive. Meanwhile, China has been trying to implement AI regulations that reinforce government control with small regards to ethical safeguards. If the US imposes overly restrictive policies while China moves ahead with fewer constraints, it could fall behind in AI capabilities. Striking the right balance is essential to maintain ethical leadership without losing the race. The European Union has also taken a proactive approach to AI regulation with the AI Act, which could influence US policy direction. However, heavy-handed regulations could slow innovation, pushing companies to relocate AI development to more lenient jurisdictions.
The semiconductor factor
One of the most overlooked aspects of the AI race is the semiconductor supply chain. Advanced AI systems rely on cutting-edge chips, and the Taiwan Semiconductor Manufacturing Company (TSMC) dominates global production. The US has recognised this vulnerability and launched the CHIPS Act to boost domestic semiconductor manufacturing. However, China has also ramped up efforts to reduce reliance on foreign chipmakers, investing billions in semiconductor research. If the US cannot secure a resilient chip supply chain, it could face significant barriers in developing next-generation AI systems. Geopolitical tensions over Taiwan add another layer of uncertainty, as any disruption to TSMC’s supply chain could have global ramifications for AI development.
Conclusion
In conclusion, the AI race is not just about technological advancement; it is about shaping the future of global power. The US must act decisively by increasing AI investments, promoting public-private partnerships, and implementing strategic policies that ensure long-term leadership. Without coordinated action, the nation risks ceding ground to China, with profound consequences for security, democracy, and economic influence. The time to lead is now.
To take advantage of AI’s opportunities, the US should prioritise:
Federal AI investment: to expand AI research funding beyond private tech firms.
Talent retention and immigration reform: to make it easier for AI researchers to work and stay in the US.
Semiconductor self-sufficiency: to strengthen domestic chip production and avoid reliance on Taiwan or China.
Balanced regulation: to ensure ethical AI development without hindering innovation.
AI is more than just a technology; it is the foundation of the next global order. If the US fails to act strategically, it risks losing not only an opportunity for technological leadership but also its position as a global power.