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January 25, 2021

U.S. Holds Onto Lead in AI, But China Poised for Ascent


The United States is maintaining its early lead over China and the European Union in development and application of artificial intelligence technology, according to a new report from the Information Technology and Innovation Foundation (ITIF). While the Americans’ lead is still substantial today, China is poised to close the gap, while the EU is largely failing to keep up, the report found.

For its January 2021 report, titled “Who is Winning the AI Race: China, the EU, or the United States?” ITIF researchers Daniel Castro and Michael McLaughlin compared how the three regions have fared since 2019, when the ITIF’s Center for Data Innovation issued a report that analyzed the AI capabilities of the three regions using 30 metrics across six categories, including: talent, research, development, hardware, adoption, and data.

Back in 2019, the researchers found that the United States led across four categories, including talent, research, development, and hardware, while China led in two categories, adoption and data. “Out of 100 total available points, the United States led with 44.2 points, followed by China with 32.3 and the European Union with 23.5,” the researchers wrote in a blog post today.

For the new report, Castro and McLaughlin updated 15 of the metrics, and added a new one. It found the U.S. slightly extended its lead to 44.6 points, while China had 32.0 points, and the EU had 23.3.

“Crucially, China has made incremental progress–reducing the gap or extending its lead over the United States in more than half of the updated metrics,” the researchers write. “In contrast, the EU has made progress relative to the United States in only slightly more than a quarter of the updated metrics. As such, the United States has maintained or expanded its lead over the European Union in nearly 75 percent of the updated metrics.”

The US leads China and the EU in AI, according to ITIF (helloRuby/Shutterstock)

The U.S. was able to maintain its lead because it scored well in two heavily weighted categories: venture capital and private equity funding. While China scored incremental improvements in the report, there is reason to believe that it could be on the cusp of making much greater gains in the AI race in the near future, the researchers say.

According to Castro and McLaughlin, China’s AI capabilities relative to the U.S. and the EU have improved in several ways.

“First, China has surpassed the EU as the world leader in AI publications,” they write in the report. “Second, the quality of its AI research has generally trended upward year to year. Third, its software and computer services firms have increased their R&D spending. Fourth, China now has nearly twice as many supercomputers ranked in the top 500 for  performance as the United States—the United States led in this indicator as recently as 2017.  Finally, China likely continues to lead in the amount of data generated. Overall, however, China has not significantly reduced the gap in AI between itself and the United States, but its trend of consistent progress could eventually evaporate the U.S. lead.”

You can download this  ICIF report here (PDF)

The Europeans, by contrast, do not appear ready to match the Americans in AI. A big part of the deficit, at least in ICIF’s metrics, can be traced to vastly more funding in the states relative to the EU. For example, private equity and venture capital funding in the EU grew from 13% of the U.S.’s level in 2016 to 22% in 2019. However, that means the EU is investing less than one dollar for every four dollars of American investment.

The ITIF recommends that the EU increase its spending on R&D and make other tax policy changes to catch up to the US and China. Beyond that, a cultural change is needed if Europe is going to be considered a leader in AI.

“But the biggest challenge for the EU and member states is that many in Europe do not trust AI and see it as technology to be feared and constrained, rather than welcomed and promoted,” the authors write. The General Data Protection Regulation (GDPR), which governs how data can be used in the EU, hampers the collection of data, which limits the development of AI.

The ICIF also offers recommendations to the U.S. for maintaining its lead. For starters, to keep top AI talent from leaving academia, the ICIF recommends more National Science Foundation (NSF) grants for AI research. More scholarships and an increase in H-1B visas will also help to attract talent. A more generous R&D tax credit would in the U.S. would also help.

Getting AI tools into the hands of more federal agencies would also help, the ICIF says, as would ensuring that any data privacy laws do not hinder the collection of data that could be used to further AI research.

Castro and McLaughlin also offered this warning:

“Moreover, when U.S. policymakers propose banning AI-based technologies such as facial recognition or algorithms used to screen job applicants, on the misguided notion that they are inherently biased or not protective of civil liberties, they are in essence paving the way for China to take the lead in that technology.”

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