Schmidt warns Europe risks reliance on Chinese AI without major investment

Europe risks becoming reliant on Chinese artificial intelligence technology unless it makes major investments in its own open source AI labs and tackles high energy costs, according to Eric Schmidt, the former head of Google and current tech investor.

Speaking at the World Economic Forum in Davos, Switzerland, on Tuesday, Schmidt highlighted a growing divide in how different regions approach AI development. He explained that American companies are mostly choosing closed source models that require purchase and licensing, while China focuses on open-weight and open-source systems.

Closed versus open source models

“Unless Europe is willing to spend lots of money for European models, Europe will end up using the Chinese models. It’s probably not a good outcome for Europe,” Schmidt warned.

Closed-source models like Google Gemini and OpenAI’s ChatGPT keep their underlying code private and unavailable for public download or review. Though these systems provide a smoother and more consistent user experience, they cost more and offer less flexibility.

China has become a leader in creating open-weight models, which allow greater transparency.

Energy costs pose major challenge

Schmidt stressed that Europe needs to tackle expensive energy costs and construct more data centers to train AI technology if it wants to stay competitive globally. He has started a data center company focused on managing the massive power requirements of this infrastructure, and has previously expressed worries about AI straining electricity supplies in the United States as well.

Europe has fallen behind its American and Asian competitors in the race for AI advancement. While the continent is working to expand data centers and implement the technology, the efforts remain smaller than Silicon Valley’s. France’s Mistral AI stands as Europe’s top AI startup, reaching a value of €11.7 billion ($13.7 billion) in last year’s funding round. However, this represents just a small portion of OpenAI’s worth, which exceeds $500 billion.

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