Microsoft President Brad Smith talks about his vision for the future of the development and application of artificial intelligence in education in NRW during a press conference in North Rhine-Westphalia, Berlin, June 4, 2025.
Soren Stasz | Picture Alliance | Getty Images
U.S. tech companies should be “a little concerned” about the subsidies their Chinese competitors are receiving from the government in the AI race, Microsoft President Brad Smith told CNBC.
As competition between U.S. and Chinese companies intensifies to develop cutting-edge models, Smith said the U.S. has an advantage in “access to the world’s most powerful chips” and “other innovations.”
But he also said in an interview on the sidelines of the AI Impact Summit in New Delhi, India: “I think we always have to think about Chinese subsidies, and maybe be a little concerned.”
China’s AI companies have received support from the government with measures such as a multibillion-dollar state investment fund and cheap energy vouchers for computing needs. Smith’s warning comes as Chinese companies have released a number of models in the past two weeks, and their low-cost AI models could be attractive in developing countries.
Smith said subsidies from the Chinese government to Chinese companies are “the fundamental approach China has successfully taken to disrupt the telecommunications market” when state funding and support helped companies such as Huawei and ZTE expand.
“Some American companies have disappeared. European companies like Ericsson and Nokia have been put on the defensive,” Smith added.
Smith said Chinese companies Huawei and Alibaba have data centers around the world, and “it’s not difficult for China to subsidize them.”
“I think for the rest of us, we have to compete with it and we have to compete well with it with government support,” Smith said.
CNBC approaches alibaba Huawei had not responded to a request for comment on whether it accepted Chinese state aid at the time of publication.
Alibaba’s cloud computing division sells AI services through the company and has operations around the world. But it doesn’t always build data centers outside of China, instead partnering with other infrastructure companies.
How China is supporting its tech companies
Last year, the Chinese government launched a 60.06 billion yuan ($8.42 billion) national AI fund to invest in early-stage projects.
Cities across the country, from Shanghai to tech hub Shenzhen, are offering cost-cutting “vouchers” to companies looking to rent computing power.
Cheap energy is another advantage for Chinese companies looking to build the power-hungry infrastructure needed to train and run AI models.
Microsoft announced Wednesday that it is on pace to invest $50 billion by the end of the decade to help bring AI to developing countries in the “Global South,” including investments in infrastructure and reskilling.
Rory Green, chief China economist at TS Lombard, told CNBC this week that a “China high-tech bloc” could easily form in the developing world.
“I think the choice is pretty simple for these economies. It’s easy to imagine a world in five to 10 years where probably most of the world’s population will be running on a Chinese technology stack,” Green said.
