Soumitra Dutta, director of the Portulans Institute and former dean of the Saïd Business School at Oxford, and Bruegel senior fellow Alicia García-Herrero opine on the US-China duopoly and how other countries can reduce their dependence on it in their recent working paper. “What we see is not a race in which many credible entrants compete on equal terms, but a consolidation of technological power in the United States and China," they write.
Consider these facts. Roughly three quarters of global benchmarked AI compute is estimated to be located in the US‚ with another 14% in China․ The US produced 40 notable AI models, China 15 and Europe just three in 2024. China refines around 99% of the world's gallium and leads refined production of 19 of the 20 critical minerals the IEA tracks․ China and the United States are the only two countries that control or are close to having control over every element of the AI supply chain: minerals‚ energy‚ chips‚ data centers‚ models and capital․
The authors coin the term "N-2 problem": In a world of N countries‚ only two can pursue full AI sovereignty, with everyone else dependent on one or both of them․
In 2025‚ China further restricted rare earth exports․ In April 2026‚ China ordered Meta to unwind its $2 billion acquisition of Singapore-registered AI startup Manus, which has Chinese origins․ In June 2026‚ the US Department of Commerce had reportedly given Anthropic just 90 minutes to restrict access to its two most advanced models to US citizens‚ and Anthropic opted to cut access entirely․ The order was lifted a couple of weeks later. The authors say that the EU's AI Act and Digital Markets Act were of little help as they are aimed at firms rather than a foreign government's security decisions.
Soumitra Dutta and Garcia-Herrero argue that AI dependence is worse than dollar dependence‚ and for several reasons․ AI threads through a far larger range of society, public administration‚ healthcare‚ logistics‚ and defence‚ than a reserve currency does. It's also much harder to get out of․ Redenomination may be possible for trade contracts․ But hospitals‚ courts and tax offices can't quickly rebuild the physical models‚ cloud and chips on which they depend․ Third‚ the window for building alternatives is closing fast․ Supply chains‚ standards and data pipelines are being locked in now.
Fourth‚ you don't remove a country from the dollar system without the cooperation of banks and governments and without causing collateral damage․ But a tech company can turn off access to its AI models with a software switch.
Top comments (0)