How the AI Act Harms Small Innovators

It’s a race that has been kept politely out of the mainstream discourse, spoken of only in the tech press. But this week, Jensen Huang, CEO of chip Goliath NVIDIA, decided to lob it into the mainstream, with a warning: “China” he said, “Is going to win the AI race.” 

Huang’s warning was directed towards America. He later clarified his comments, saying that he wanted America to win the race. But that resource constraints: around consolidation, energy, and talent, might lead it to stumble, compared to China’s command economy. 

In some sense, what he is hinting at is massive government support: a new Manhattan Project. A new Space Race. Winning that will define the geopolitics of the 21st century.

In another sense, though, the race is not a race between two superpowers. It is between them and those who aren’t in it. Not least away from the beleaguered tech-desert of the EU, which must for now watch the prime movers pull ever further ahead. 

Europe understands the challenge. It issues directives designed to embrace it. 

And in terms of Huang’s challenge, the EU understands dirigisme very well. You might say it understands little else. Yet the fruits just aren’t there. 

Its Digital Markets Act continues to draw the ire of US tech firms. Last year, it passed the AI Act - designed to regulate the industry. A piece of legislation that seemed chiefly concerned with the internet chat forum hobbyhorse of AI Safety. 

Now, there is talk of special AI factories - consortiums, regional hubs, that will operate at scale, and pass their systems down to smaller companies, SMEs, who could not individually afford to keep up with the coming tech deluge. 

At the same time, in the mid-tech world, the Dutch chip maker Nexperia has been at the centre of a geopolitical tug of war between its Chinese owners and the forces of the West, over who controls these kinds of vital supply lines. Europe let Nexperia fall from its grasp – and now demands to have it back. 

So which way will the continent’s tech scene bend in these increasingly harsh headwinds? Will it become little more than a talent pool for America? Can it resist the phalanx of Chinese systems - and the coming wave of native Chinese chips? Is the solution US-style private sector innovation? Or Beijing’s lock-step market making? 

Peter Caddle has been a Kremlinologist of the Brussels bubble for a while now. For 2 years, he was a journalist at Brussels Signal, with a beat in tech. He’s now a visiting fellow here at the Danube Institute. He talks to Gavin Haynes about whether we should be panicking.