This Briefing explores the growing influence of technology giants in international politics, and the interplay between power and governance in a race for AI regulation. This piece was written by Sean Tam and edited by Ruyi Liu.
Following every Fortune 500 company in 2024, Artificial intelligence (AI) has now also become a buzzword in the political field. Highlighted in the 54th World Economic Forum (WEF) in January 2024 and at the Munich Security Conference (MSC) in February 2024, it has become clear that technology is now dominating the locus of international affairs, drawing a level of concern that equates with conflict resolution and climate policy.
Global Confidence in Technology Companies
Since early 2023, the global shares of the Magnificent Seven (M7), including Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla, have dominated the headlines with their exponential gains, taking almost 30% of the S&P 500’s market value and overshadowing the rest with 107% (versus 26%) growth on indices representing total returns in 2023. This AI-hype bolstered growth reflected global confidence in their capabilities to develop nascent technologies with their expertise and investments. As of February 2024, the M7 alone has outpaced all listed companies in almost every G20 country. Taking Microsoft and Apple as instances, they respectively have a market capitalisation of around US$3 trillion each, which could easily put them in the Top 10 of global GDP, ranking 7th and 8th, if they were states.
This global confidence is not only product- and service-based. It is also demonstrated by their proactive involvement in shaping regulatory frameworks that would enable more beneficial adoptions of technology across institutions, industries, and individuals. The AI Elections Accord, announced at the Munich Security Conference 2024, is a monumental example in which 20+ technology giants collaborated to regulate AI-based deception in elections. On one hand, this political goodwill is a welcomed gesture for most of the states as they put forth solutions to maintain electoral fairness, provide transparency, and promote citizens’ awareness of misinformation. Yet, on the other hand, by committing to this Accord, it also means these companies, armoured with their proprietary solutions, will be the new gatekeepers of information. While they maintain their stances of neutrality, their initiative carries an ideological undertone which is understood to be in favour of protecting the healthiness of democracies. These technology giants are entrenching themselves deeper in the spheres of politics.
Technological Progress as a Race for Geopolitical Dominance?
There are various observations across global fora. Technology, on one hand, democratises computing power and thus grants us easier access to sophisticated solutions that can be constructed in minutes. On the other hand, it exposes us to unverified information and active disinformation, increasing the surface area of hostile acts. For better or for worse, states and companies today are utilising technology to achieve goals concerning security and development, such as novel tools powered by 5G satellites, advanced analytics, facial recognition, and more.
The Munich Security Report 2024 explicitly stated that “technological progress has become a race for geopolitical dominance”, and cleavages multiply along with the speed of innovation. Developing from the conventional lens of security concerning technological application to military arms and intelligence services, the second decade of the 21st century is likely to see the establishment of new international battlefronts. The scope of national security has expanded from the physical to the digital, with critical infrastructures, technical expertise, and regulations (or the lack thereof) becoming integral components. States today are increasingly collaborating with the private sector to enhance not merely defence capabilities, but technological superiority in the adaptation to novel threats to national security.
Power Parallel to Sovereignties
It is apparent these technology giants have become as powerful as sovereignties, not only because of their sheer economic power but also their active involvement in governance. They have become part of the regulatory circle where they decide the tools and guardrails for regulation, while maintaining private ownership of the sources of expertise and innovation. Economic prowess and governance aside, their access to the infrastructures that hold significant amounts of data directly challenges the exclusivity and superiority of what a sovereignty would embody. Despite rigorous regulations across regions and states, it is undeniable that states must rely on these technology giants and their associated products to enable informed policy-making, modern productivity, and digital services across industries.
While their commercial operations are global, these technology giants eventually centre their chief priorities based on their headquarters. For instance, it is difficult to disentangle the M7 and the US, where the M7 are all based. The M7 and its bedfellows, then, do inherit and harbour political stances, enabling them to become political actors or assistants to these actors. Their participation in conflicts with their sophisticated digital solutions is not deficient in examples. Microsoft and Palantir have supported Ukraine in building its digital resilience against Russian cyberattacks and espionage. SpaceX joined its counterparts by providing thousands of secure communication terminals, Starlink, to the Ukrainian battlefronts and, controversially, to the Israeli government as well.
Obviously, states can leverage these technology solutions to enhance their chances of success on the battlefield. What one must not overlook, though, is that the interest alignment is not one-way from state to company. These collaborations also enable the M7 to advance interests beyond pure commercial considerations, stemming positive perceptions of the wider consumer ecosystem and building liberalist narratives aligning with global stakeholder communities. Their participation in turn shapes their discursive power vis-à-vis domestic and international audiences and reinforces their instrumental influences on the state’s level of geopolitical involvement.
Global Technology Value Chain: A Vulnerability
States are relying more than ever on these technology companies to deliver and support them in achieving their aims. The governments of Germany, Spain, and France, have all recently signed investment partnerships, worth billions of euros, with Microsoft and Google on AI adoption and digital infrastructure development. Technological connectedness has shaped new identities of the general public today, and thus their expectations of states have changed from a traditional security mindset to a digital mentality, emphasising the use of technology to improve quality of life, create modern job opportunities, and increase global competitiveness.
This surge of demand for technological connectedness, however, is a global vulnerability. If we zoom into the supply chain of AI chipset manufacturing, which is essential for the compute provision of AI solutions, the concentration is extremely high: NVIDIA takes 80-95% of chip design, TSMC has 90% of chip fabrication, and ASML owns 100% of semiconductor manufacturing equipment in the world. Should this critical upstream of the AI value chain be disrupted, it would mean disaster for the globally interconnected economy, especially when its growth has been anchored by the confidence in the technology sector. At the downstream of the value chain, states, industries, and individuals that are all relying more and more on their compute powers to develop solutions, realise productivity, and create jobs will be jeopardised imminently.
The importance of AI global value chain has also exposed another aspect of superpower rivalry between the US and China. The Biden administration, for example, has imposed strict US chip export restrictions on China for fears of Chinese weaponisation of these technologies to strengthen their military power. As China denies such claims and opposes such restrictions, it has recently gained breakthroughs on semiconductor developments with Huawei and SMIC, taking one step closer to President Xi’s objective of technological independence. This notion of de-risking from over-dependence is shared by the US as it anxiously develops its own chip manufacturing chain with TSMC. The Taiwan-based company is also concurrently diversifying its production to the US, Germany, and Japan as they worry US-China rivalry would intensify each of the superpower’s demands for control over such strategically important technology. The clock is ticking as both compete for advancements and dominance.
A Multifaceted Battle
Nevertheless, this international battle does not stop on the scramble for AI resources. The race for AI has emerged to become the race for AI regulation. This regulatory battle would mean whoever triumphs in this rule-setting process will have the most bargaining power in governing the use of technology and the operations of related businesses. It will also open up a new geopolitical cleavage where the rule-setter state(s) can control technology companies’ operational access to markets and technical access to vast amount of data. There will be winners that are able to manoeuvre geopolitical realities, and losers that are excluded from the new norm.
New standards are developing in favour of rules-based regimes given the complexity of novel technologies. The EU has been busy establishing new regulatory frameworks, notably the AI Act announced in December 2023, aiming to universalise standards and put constraints over technology companies. But as the AI Safety Summit unfolded in late 2023, it has become apparent that not all states, especially major powers, are willing to sacrifice their autonomy when defining their rulebooks of AI usage. The US, for example, believes it is their adherence to the principle of minimal market interference that has created a fertile ground for technology giants and unicorns, and overregulation would impede their innovative progress. China, as another global technology hub, commits to the notion of “social harmony” and therefore would not easily give up their state-first governance principle, putting a stark contrast against the rules-based regimes in EU and the US. While the Summit pushed states to recognise the risks of AI, the blatant truth is revealed: there were no concrete actions that could be drawn in consensus to further regulate the use of AI.
The real danger concerning the rise of technology giants is not only a matter of digital reliance. What lies beneath this reliance is a thin, ultra-concentrated supply chain that could topple global economic stability. The pessimistic outlook is that in the course of the current regulatory battle, it intensifies international relations and doubles the complexity of governance, with one layer being novel technology, the other being the limits of power of these technology giants.