Eric Schmidt says China trails behind the US in AI for these 4 reasons

• Former Google CEO Eric Schmidt said the US is "way ahead of China" in AI development.
• Schmidt cited chip shortages and more English language material to train AI models.
• He also said China's reduced funding and focus on for-profit apps are barriers to its advancement.

Former Google CEO Eric Schmidt thinks the US is "way ahead of China" when it comes to AI.

"In the case of artificial intelligence, we are well ahead, two or three years probably of China, which in my world is an eternity," Schmidt said in an interview with Bloomberg on Tuesday. "I think we're in pretty good shape."

Schmidt served as Google's CEO from 2001 until 2011 and remained its chairman until 2015. Following his departure, Schmidt has invested in various AI companies, including Anthropic. He also became the chairman of the Department of Defense's Innovation Board in 2016 and chaired the National Security Commission on Artificial Intelligence for three years.

Schmidt said the US stands to be the clear winner in the AI race — as long as it doesn't screw up its lead. Since China is focused on dominating certain industries, the US needs to compete with them and win, he added.

At the start of 2024, China had approved over 40 AI models in a six-month period, including 14 new Large Language Models approved for public use in a week span. Baidu, a search engine giant referred to as "China's Google," is leading the pack.

Schmidt talked about four factors that contributed to his view that China is behind in the AI arms race.

Chip shortages

Schmidt said China is "struggling because of chips" and shortages.

In a separate interview with CNBC on Tuesday, Schmidt said China has been set back by the Trump and Biden administrations restricting access to high-speed chips, particularly Nvidia chips.

"They're certainly angry about that," Schmidt said.

The chips serve as a crucial component in the effort to scale AI. The tech-related tensions between the US and China have resulted in a push from the government to produce semiconductors in the US. In November 2023, the US Department of Commerce implemented the Advanced Computing Chips Rule making it harder for China to import advanced AI chips from American manufacturers.

The Biden administration most recently considered imposing sanctions on several Chinese semiconductor firms linked to Huawei in March.

Schmidt thinks there's less Chinese material to train AI models with

Schmidt also said in the CNBC interview that there's not as much Chinese material available to train large language models. Since English dominates the internet, research papers, and books that large language models train on, he believes English provides a larger pool of information to learn from.

"That's why English is so strong in these large language models," Schmidt said.

Additionally, most training data is in English, he said, which could lead to misunderstandings and misinterpretations in other languages.

Reduced funding

Schmidt said that China is also facing a huge reduction in foreign investment and at-risk venture capital. Meanwhile, the US has exploded in these areas, he said.

China has been on the economic decline for the last couple of years and it continues to face deflation problems.

In November 2023, it suffered its first investment deficit as US tensions rose and Western countries leaned away from business involvement.

Focusing on the wrong areas

The former Google CEO said that China is focused on building for-profit application companies which may ultimately be successful. But they're not platform-focused, he argued.

"Three or four of the top apps in America are, in fact, of Chinese origin," Schmidt said. "But at the moment, the leadership is US."

While apps like TikTok may be successful, some industry experts think that China is lagging behind in foundational AI models, according to a report from CNBC.

"We should be very proud to be here," Schmidt said. "America has invented this future and this particular future, the one which is AI and quantum and the other technologies, that people are talking about. We have a shot of actually dominating the world for the next 10 or 20 years if we do it right."