Key facts
- Citadel Securities warns US energy infrastructure constraints could cede AI advantage to China.
- China is poised to massively expand domestic power generation capacity, while the US faces grid limitations and local opposition to data centers.
- Nohshad Shah, head of EMEA fixed income sales for Citadel Securities, stated China could win by combining cheaper AI models with superior infrastructure.
- Shah argued that the US needs more political support and looser regulation to maintain its lead in AI development and deployment.
- Recent AI doomsday warnings could be an overreaction and hinder US progress, according to Shah.
Citadel Securities has warned that America's leading position in frontier AI development could be jeopardized by its own energy infrastructure bottlenecks, potentially allowing China to gain an advantage. Nohshad Shah, head of EMEA fixed income sales for the firm, wrote in a blog post on September 26 that while China may have less capable AI models, its more robust physical infrastructure could be decisive.
Shah explained that China's ability to combine "slightly less capable (and much cheaper)" AI models with "more factories, robots, vehicles, drones, and industrial equipment" could lead to success. He differentiated between AI "development," driven by labs, and "deployment," which hinges on a country's ability to integrate AI across its economy.
The primary bottleneck identified is energy. Shah noted that the US may lack sufficient power supply for rapid AI expansion, citing local opposition to data centers and grid connection issues. In contrast, China is projected to significantly increase its power generation capacity. "China will add almost six times as much power-generation capacity as the US over the next five years, whilst America remains constrained by grid connections, permitting, and local opposition to data centers," Shah wrote. This scenario presents an "uncomfortable possibility: America develops the better models…but China has more places to run it."
Shah believes the US can still prevail but requires greater political support and relaxed regulations. He previously argued in August that "permission" rather than physical assets would be the next major AI bottleneck. He also suggested that recent AI doomsday warnings are an overreaction and could impede US progress, stating, "The mistake is to tell the public that AI may eliminate their jobs (or indeed humanity itself!) and then ask the same public to provide the land, electricity and permits required to build it."