AI reshapes race for digital sovereignty

Artificial intelligence is at the core of digital transformation and is set to drive the next phase of productivity growth. However, AI has been politicized ever since the administration of former US president Joe Biden introduced the first export controls on United States-designed semiconductors in 2022.

Restrictions on Chinese 5G network equipment were imposed under the first Donald Trump administration in the name of protecting national security. This stance has since been codified into guidelines and laws of the European Union. The US' export controls on AI technology are primarily driven by a raw attempt to contain China.

Now, the dominant focus on semiconductors and scaling compute as the primary path to better models and higher intelligence, which makes US hyperscalers pay around $200 billion each year, has been disrupted by China's AI startup DeepSeek, which, like its Chinese peers, only has limited access to advanced Nvidia chips for model training and inference.

DeepSeek was able to optimize compute efficiency across what Jensen Huang, founder and CEO of US semiconductor company Nvidia, defines as the three scaling laws — pre-training scaling, post-training scaling and test-time scaling — without relying solely on sheer computing power for each of them.

Even Europe's tech community, paralyzed by the increasing gap with the US' AI industry, has been inspired by DeepSeek's compute efficiency-driven approach.

The idea has been reinforced that catching up is still possible by focusing on software engineering rather than pouring billions into compute infrastructure.

Yet, Europe's awakening is driven not just by DeepSeek, but primarily by the current US administration turning its back on Europe and former prime minister of Italy Mario Draghi's devastating assessment of the EU's decreasing competitiveness.

The success of DeepSeek also challenges the assumption that strict regulations hinder breakthrough innovation. China enforces stringent regulations to ensure AI safety and security. Yet, its AI ecosystem continues to flourish.

Immediately after his inauguration, Trump revoked his predecessor's executive order on AI as a means of rejecting "overregulation", ensuring the US "develop AI systems that are free from ideological bias" and sustaining US AI leadership for the benefit of US workers.

This shift may still lead to some relaxation in digital regulations in both China and Europe. Europe has withdrawn its long-announced AI Liability Directive and has pledged regulatory "simplification".

Meanwhile, China will continue to pursue an issue-based, sector-focused approach.

In March, the Cyberspace Administration of China announced a new regulation, to take effect in September, requiring that all AI-generated content be clearly labeled to combat misinformation and promote transparency in digital media.

Shared leadership

While the US still leads in frontier AI, China is closely following but is ahead in 5G and shaping 6G standards. China is also making significant strides in 5G-AI integration.

China's tech giant Huawei's 5G-Advanced is an AI-centric network platform, already deployed by more than 60 mobile operators globally, enabling the uplink velocity and low latency required for industrial upgrades to power AI-driven robotics and manufacturing.

That Huawei pursues such an infrastructure-first approach to AI is no coincidence. It reflects China's broader development model, which has always prioritized infrastructure as the primary driver of progress.

Unfortunately, 5G is at the center of geopolitical tensions, which not only delays its deployment and upgrades, but also hinders efforts to make networks more cybersecure, as the proper approach requires implementing policies, international standards and transparent practices.

The US' latest measure is the formation of a National Security Council to further reduce supply chain dependencies and win the strategic competition with China over 5G and 6G.

Digital sovereignty

Digital sovereignty is today's defining policy strategy, where investment and governance decisions in digital transformation should benefit society and promote shared prosperity. It is not only about independent policy choices but building capacity and enhancing technological capability, without resorting to protectionism and coercion.

China is on course to become a global AI innovation center by 2030. Should Chinese AI companies continue pursuing an opensource strategy, China won't be the next AI hegemon but would foster a more inclusive form of dominance.

Through its AI Development and Safety Network and Global AI Governance Initiative, China is actively seeking collaboration on the safety and security of AI, further emphasizing its approach to shared leadership.

The Global South countries can benefit from such a "Digital Westphalia", build upon their own sovereign strategies and bridge their digital divides.

This would stand in stark contrast not only to today but also to history, when a few Western countries maintained a telecommunications monopoly throughout much of the 20th century, making it nearly impossible for latecomer countries to break through such asymmetry — except for China.

The author is a senior fellow and Europe director at the Beijing-based think tank Taihe Institute.