Editor’s notice: On Thursday, Could 8, Microsoft Vice Chair and President Brad Smith testified earlier than the Senate Commerce Committee. To view the proceedings, go to the committee’s web site.
Successful the AI Race:
Strengthening U.S. Capabilities in Computing and Innovation
Written Testimony of Brad Smith
Vice Chair and President, Microsoft Company
Senate Commerce Committee
Chairman Cruz, Rating Member Cantwell, and Members of the Committee,
Thanks for the chance to testify on the vital difficulty of synthetic intelligence. I’m Brad Smith, the Vice Chair and President of Microsoft Company.
AI has the potential to turn out to be essentially the most great tool for folks ever invented. Like the final goal applied sciences that preceded it, similar to electrical energy, machine instruments, and digital computing, AI will influence each a part of our financial system. It’ll form not simply how we work and dwell, however how we compete, prosper, and keep safe as a nation between now and the center of this century.
The discover for this listening to aptly refers to an “AI race.” I want to speak at this time about what is required to win this race.
The AI race includes each know-how and economics. It requires each innovation and diffusion. It’s each a dash and a marathon. The nation can win a lap however lose the race if it fails to deliver collectively all of the substances wanted for achievement.
It’s a race that no firm or nation can win by itself.
To win the AI race, america might want to help the non-public sector at each layer of the AI tech stack. The nation might want to accomplice with American allies and buddies world wide.
In my testimony at this time, I’ll concentrate on three strategic priorities the place this Congress and the federal authorities will make a distinction.
First, the nation should win the AI innovation race. It will require huge datacenters and AI infrastructure that want federal help to broaden and modernize {the electrical} grid on which they rely. The nation should recruit and prepare expert labor like electricians and pipefitters which are in brief provide. All of us should summon the most effective of our researchers at nationwide labs and universities, supported by federal primary analysis applications and partnerships which have turn out to be the envy of the world. We might want to proceed to excel in transferring revolutionary concepts from tutorial labs into firms and new merchandise. And we might want to help AI builders with open and broad entry to public knowledge.
Second, the nation should win the AI diffusion race. It will require that we promote broad AI adoption that may allow productiveness progress throughout each sector of the financial system. Greater than something, this requires new initiatives to advertise the AI skilling of the American workforce. It will contain primary AI fluency in our colleges and new AI coaching applications in our neighborhood faculties. It’ll additionally embody superior AI schooling that may signify the subsequent era of laptop science levels, organizational abilities that will likely be mastered within the nation’s enterprise colleges, and new programs within the nation’s regulation colleges. When mixed, these will allow firms, non-profits, and authorities companies alike to place AI to efficient use. Governments on the federal, state, and native ranges can then assist speed up this diffusion by adopting AI providers to enhance the effectiveness and effectivity of the providers they supply to the general public.
Third, america should export AI to American allies and buddies. No firm or nation is so highly effective that it will probably grasp the way forward for AI with out buddies. The US and China are competing not solely to innovate however to unfold their respective applied sciences to different nations. This a part of the race possible will likely be gained by the quickest first mover. The US wants a wise export management technique that protects our nationwide safety whereas assuring different nations that they’ll have dependable and sustained entry to vital American AI elements and providers. Maybe as a lot as something, this requires that we collectively maintain worldwide belief in our merchandise, our firms, and the nation itself.
AI as a Normal Goal Know-how
Economists generally put applied sciences into two classes, basic goal applied sciences and single-purpose instruments. Most issues on this planet are single-purpose instruments, like a smoke detector or a garden mower. They do one factor very effectively. However over the course of historical past, sure so-called basic goal applied sciences influence and generally even redefine nearly each sector of the financial system. Electrical energy is the prototypical instance, as a result of when you concentrate on it, electrical energy modified the best way each financial sector works.
The important thing to mastering the way forward for AI begins partially by understanding the function know-how has performed prior to now. The previous three centuries have introduced the world three industrial revolutions, every pushed by these basic goal applied sciences. First, it was iron working in the UK, beginning within the 1700s. After which it was electrical energy and machine instruments within the 1800s, when america overtook the UK by placing these applied sciences to work extra broadly than some other nation. After which there was the third industrial revolution over the last 50 years, pushed by laptop chips and software program.
With out query, being a worldwide chief in advancing a basic goal know-how offers a rustic a serious edge. However one lesson of historical past is that the nations that profit essentially the most and advance the quickest will not be essentially the nations the place the know-how is invented. Reasonably, it’s the place the know-how is subtle – or adopted – essentially the most rapidly and broadly. That is for good cause. If a know-how improves productiveness and adjustments each a part of an financial system, then the nation that makes use of it essentially the most broadly and rapidly will profit essentially the most.
This each frames and defines the AI alternative and problem for america. As a nation, we have to focus each on advancing innovation and driving diffusion, each domestically and as a number one American export.
The AI Tech Stack
The important thing to driving each innovation and diffusion is to acknowledge that AI, like all basic goal applied sciences, is constructed on what we within the trade name a tech stack – a stack of applied sciences which are used collectively. That is true for each nice basic goal know-how. You possibly can see this, for instance, if we return in time and take into consideration electrical energy. Thomas Edison first succeeded in 1878 in utilizing electrical energy to gentle a lightbulb. However the illumination of lights throughout a metropolis rapidly required the development of energy crops, the gasoline to run them, the creation of {an electrical} grid, the standardization of circuits, and a variety {of electrical} home equipment past the lightbulb itself. In brief, a tech stack for electrical energy.
Synthetic intelligence equally is constructed on an AI tech stack. Basically, it’s divided into three layers, infrastructure, the platform layer, and functions. You possibly can see this illustrated beneath.
The infrastructure layer is very large. Microsoft is spending greater than $80 billion this fiscal yr on the capital funding wanted for this layer, with greater than half this quantity being spent in america. This goes to purchasing land, investing in electrical energy and broadband connectivity, procuring chips like GPUs, and putting in liquid cooling. These result in the development of datacenters – or typically datacenter campuses with many buildings with probably lots of of hundreds of computer systems. This infrastructure helps each the coaching of latest AI fashions and their deployment, to allow them to be used for AI-based providers world wide.
On prime of this infrastructure, there’s the platform layer. The guts of this layer consists of AI basis fashions, together with frontier fashions created by firms like OpenAI, in addition to open supply and different fashions from all kinds of different companies – together with Anthropic, Google, Mistral, DeepSeek, and Microsoft itself. The platform layer depends on knowledge to coach and floor fashions. And it features a new era of software-based AI platform providers which are used to assist construct AI functions.
Finally, each the infrastructure and platform layers help the functions layer. These are gadgets and software program functions that use AI to ship higher providers to folks. ChatGPT and Microsoft’s Copilot are each examples of AI functions. One of many wonderful issues in regards to the functions layer is it’s not simply firms – giant or small or established or startup – which are creating AI functions. It’s all people. It’s researchers utilizing new AI-infused functions to alter drug discovery. It’s non-profits altering the best way they ship providers. It’s academics utilizing AI as a instrument to enhance the best way they put together materials for a classroom. It’s governments making every little thing from the submitting of a tax return to the renewal of a driver’s license simpler and extra environment friendly.
To construct a brand new AI financial system, it’s vital to get all three of those layers working and to get a flywheel turning throughout the ecosystem. It’s important to construct the infrastructure layer so folks can develop and deploy the fashions on the platform layer. It’s important to make use of the AI fashions so that individuals will construct the functions on prime of them. And it’s important for patrons to undertake the functions, so the market can develop, and drive elevated funding to broaden the infrastructure additional. The method repeats itself. That is how a brand new financial system is born.
Success Requires an Total Ecosystem
The flywheel impact makes clear that success requires not solely nationwide progress at one layer of the tech stack, however at each layer. That’s what the non-public sector at present is pursuing in america higher than in some other nation. And it’s what this Congress and the Government Department might help help with a method that promotes each AI innovation and diffusion up and down this stack.
Nationwide AI management requires not solely success by just a few firms, however by many. Immediately’s panel, involving main companies similar to OpenAI, AMD, CoreWeave, and Microsoft, displays necessary slices of the brand new AI financial system. The AI financial system requires a multifaceted and built-in ecosystem that features “Huge Tech” and “Little Tech,” startups and extra established companies, open supply and proprietary builders, suppliers and prospects, companies that create knowledge and companies that eat it, all working collectively. Governments as each regulators and main AI adopters have vital roles to play.
Commentators generally concentrate on the tensions between completely different contributors on this tech ecosystem. These deserve consideration. What’s typically missed is that the completely different contributors additionally depend upon one another. And which means that the completely different contributors to the AI ecosystem all must be wholesome.
A big know-how firm like Microsoft has a novel alternative – and duty – to accomplice with and help the contributors at each stage of the tech stack. We try to advance not simply innovation however an financial structure, enterprise fashions, and accountable practices that may assist develop the AI market on a long-term foundation. Not only for america, however the nation’s buddies and allies.
Successful the Innovation Race
Though the AI financial system is being constructed principally by the non-public sector, authorities insurance policies and initiatives have to play a vital function. This begins with work wanted to assist gasoline innovation. A number of areas deserve specific consideration on this listening to.
Energy the expansion of datacenters
Simply as you possibly can’t have dependable electrical energy in your house with no powerplant, you possibly can’t have AI with out datacenters and AI infrastructure. And these datacenters require an enormous provide chain to assemble and huge quantities of electrical energy to function.
America’s superior financial system depends on 50-year-old infrastructure that can’t meet the rising electrical energy calls for pushed by AI, reshoring of producing, and elevated electrification. The US might want to spend money on extra transmission and power assets, onshore our provide chains, and modernize our electrical grid to help forecasted will increase in electrical masses. Microsoft is investing in these areas itself.
We urge the federal authorities to streamline the federal allowing course of to speed up progress in all these areas. The present federal allowing processes typically contain a number of companies and complicated, unpredictable, multi-year critiques. This hinders progress. The federal authorities ought to take instant steps to determine dependable, affordable, and clear timelines for allowing selections. This may also be completed by standardizing federal allowing processes and designating a lead company to shepherd the permits by the method. Additional, the allowing companies ought to make the most of AI and digital instruments to enhance timelines and transparency for candidates and make sure the allowing companies have fast entry to data to help them of their overview and decision-making course of.
We had been happy to see President Trump’s latest Government Order, “Updating Allowing Know-how for the twenty first Century,” directing companies to make most use of know-how within the environmental overview and allowing course of. The Congress also needs to look to the Federal-State Trendy Grid Deployment Initiative as a confirmed program that may be leveraged to ship outcomes.
That is simply the beginning of what’s wanted to modernize and broaden America’s power grid. We have to acknowledge that new investments within the grid are simply as necessary at this time as they had been a century in the past, when america led the world in non-public and public sector help for electrical energy.
Develop the AI Infrastructure workforce
Maybe the only greatest problem for knowledge heart enlargement in america is a nationwide scarcity of individuals – together with expert electricians and pipefitters. Electricians, for instance, are important to datacenter development, putting in a fancy system {of electrical} panels, transformers and backup energy programs. We have now employed hundreds of electricians throughout the nation, together with in Arizona, Georgia, Virginia, Washington, and Wisconsin. However america doesn’t have sufficient electricians to fill the rising demand. We estimate that over the subsequent decade, america might want to recruit and prepare half 1,000,000 new electricians to fulfill the nation’s rising electrical energy wants. We want a nationwide technique to make sure we meet this chance for American employees.
These are good jobs that may present nice long-term careers for folks throughout the nation. We suggest making present federal schooling and coaching funds, in addition to tax incentives, accessible to scale up these alternatives. These might embody focusing on present federal apprenticeship investments in areas which have recognized main AI infrastructure initiatives and supporting present coaching facilities to rapidly improve the variety of registered apprenticeships targeted on electricians.
We commend President Trump’s latest Government Order, “Getting ready People for Excessive-Paying Expert Commerce Jobs of the Future,” for highlighting the significance of expert trades within the constructing of AI infrastructure and for paving the best way to fulfill this second. As federal companies work to implement the order, will probably be vital that trade forecasters and union coaching facilities work collectively to maximise influence.
Finally, we’d like new steps at each stage of presidency and in communities throughout the nation. For instance, we have to do extra as a nation to revitalize the commercial arts and store lessons in American excessive colleges. This must be a precedence for native college boards and state governments. Equally, the nation’s neighborhood faculties might want to do extra to help a nationwide initiative to assist prepare a brand new era of expert labor, together with electricians and pipefitters.
Spend money on AI analysis and improvement
To uphold America’s place as a worldwide scientific chief, it’s crucial to boost federal funding in basic scientific analysis. The US boasts a storied historical past of using public-private partnerships. The selections made many years in the past to publicly fund analysis infrastructure and supply monetary help to proficient scientists and entrepreneurs paved a pathway to American technological management. By means of federal, state and native authorities initiatives, investments had been made in regional economies and applications, betting on the ingenuity of the American folks. Notable incubators of the twentieth century – similar to Bell Labs and the community of federal nationwide laboratories – had been the results of deliberate efforts to unite trade, authorities, and academia to propel scientific development. We should deploy the same technique at this time for AI and quantum applied sciences. Investments in these areas are vital to advancing the event of revolutionary technological options that deal with advanced international challenges.
To outcompete nations like China, which have considerably boosted their analysis and improvement (R&D) investments, america should speed up strategic investments in scientific analysis for future applied sciences. Consultants predict China will proceed to take a position substantial assets in next-generation applied sciences similar to AI, superior manufacturing, clear power, quantum computing, and semiconductors over the subsequent decade.
Because the Second World Warfare, America’s technological innovation has been pushed by R&D primarily based on two vital substances that the remainder of the world has each studied and envied. The primary is sustained help for primary analysis. Whereas just a few tech firms make investments substantial sums in primary analysis, as we do by Microsoft Analysis (MSR), most world-leading primary analysis is pursued by teachers at American universities, typically primarily based on funding from the Nationwide Science Basis and different federal companies. Pushed by curiosity quite than a revenue motive, this analysis typically results in sudden however profound discoveries which are revealed publicly.
The second ingredient is a sustained dedication to investments in product improvement by firms of all sizes. The US, greater than some other nation, has mastered the method of transferring new concepts rapidly from universities to the non-public sector. This success rests on wholesome investments in each R and D, recognizing that primary analysis is commonly publicly funded and sometimes in universities, whereas product improvement is robustly and privately funded by firms. It’s the mixture of the 2 that makes American R&D so profitable.
In 2019, President Trump authorized an government order designed to strengthen America’s lead in synthetic intelligence. It rightly targeted on federal investments in AI analysis and making federal knowledge and computing assets extra accessible. Six years later, the President and Congress ought to broaden on these efforts to help advancing America’s AI management. Extra funding for primary analysis on the Nationwide Science Basis and thru our universities is one good place to start out.
Guarantee public knowledge is open and accessible
Knowledge is the gasoline that powers synthetic intelligence. The standard, amount, and accessibility of information straight determines the power and class of AI fashions. Whereas the web has been a serious supply of coaching knowledge, the federal authorities stays one of many largest untapped sources of high-quality and high-volume knowledge. But at this time, many of those datasets are both inaccessible or not usable for AI improvement.
By making authorities knowledge available for AI coaching, america can considerably speed up the development of AI capabilities, driving innovation and discovery. Opening entry to those datasets would permit for the evaluation of themes, patterns, and insights throughout broad datasets, propelling the nation to the forefront of world AI improvement.
Importantly, accessible public knowledge ranges the taking part in area. It empowers not solely giant firms however startups, tutorial establishments, and nonprofits to coach and refine AI fashions. This fosters a extra aggressive and inclusive AI ecosystem, the place innovation is pushed by concepts and ingenuity – not simply proprietary knowledge.
Compared, nations like China and the UK are already investing closely of their knowledge assets, recognizing the financial and strategic worth of national-scale knowledge administration. China’s complete system to handle datasets as a strategic useful resource and the UK’s Nationwide Knowledge Library underscore a rising international development of treating knowledge as a standard good for financial competitiveness.
Successful the AI Diffusion Race
Historical past teaches us that the true influence of a general-purpose know-how isn’t measured solely by the caliber of its main innovations, however by how rapidly, broadly, and successfully these are adopted throughout society. However the actuality is that know-how diffusion takes time, funding, partnerships, and sound public coverage.
The historical past of electrical energy affords an necessary perception for AI. As soon as Thomas Edison proved in 1878 that electrical energy might energy a lightbulb, why would anybody select to sit down at evening in a room illuminated by a candle or kerosene? But tonight, nearly 150 years later, greater than 700 million folks on the planet nonetheless dwell with out electrical energy of their houses. Diffusion requires not solely nice know-how, however sound economics.
The economics of tech diffusion begin with skilling. Nations have to spend money on the abilities wanted to make use of new know-how, each as people and throughout organizations. It’s simple to underestimate each the function that skilling performs and the necessity for public coverage to help it. However in every industrial revolution, the nation that finest harnessed the main general-purpose know-how of its time was the nation that expert its inhabitants essentially the most rapidly and broadly.
Ability the American workforce
Within the new AI financial system, People of all backgrounds will want vital AI abilities to compete. To satisfy the totality of the skilling problem, the nation should pursue a brand new nationwide aim to make AI skilling accessible and helpful for each American. It will require a really broad vary of partnerships and new coverage concepts, spanning throughout geographic, organizational, financial, and political divides.
President Trump’s latest government orders targeted on AI schooling and the workforce present vital steps in direction of a nationwide skilling technique for AI. The “Advancing Synthetic Intelligence Training for American Youth” EO establishes a transparent coverage to advertise AI literacy by responsibly integrating AI into schooling for academics and college students. By fostering this early publicity, the nation’s youth will likely be higher positioned for AI-enabled work. Congress also can contemplate leveraging present federal funding to the nation’s college districts to encourage AI studying and literacy in Ok-12 schooling.
Companies and non-profits have necessary roles to play. At Microsoft, we’re searching for to do our half to fulfill this skilling problem. In 2025 alone, we’re on a path to coach 2.5 million People in primary AI abilities. We’re partnering with the Nationwide Future Farmers of America (FFA) to coach educators in each state to combine AI into the agricultural classroom by our Farm Beats for College students program. We’re partnering with the American Federation of Academics (AFT), the biggest group representing the nation’s educators in America, to ship a co-developed coaching program to 10,000 AFT members. And we’re partnering with the State of New Jersey, Princeton College, and CoreWeave on an AI Hub in New Jersey that may embody help for AI schooling in local people faculties.
On the subject of AI skilling, an important factor we have to do is acknowledge that it is a vital area that’s ripe for consideration, studying, partnership, and innovation. It’ll have a huge effect on broadening entry to this know-how throughout our financial system and society. Generative AI is a brand new and younger know-how. So is our data of the total extent of want when it comes to AI skilling applications and help. It is a first-class precedence that deserves as a lot consideration and help as innovation in AI know-how itself.
Encourage AI adoption
The federal authorities additionally will play a vital function in AI diffusion through the use of AI itself. There are alternatives throughout the federal government to make use of AI to enhance the standard and effectivity of public providers for residents.
It’s encouraging to see the latest OMB publication of M-Memos targeted on federal authorities use and procurement of AI. Each memos emphasised the significance of eradicating obstacles to innovation, maximizing using domestically developed AI merchandise, and inspiring AI leaders inside the federal authorities to facilitate accountable AI adoption.
We’re seeing exercise within the states as effectively. We partnered with the Texas Division of Transportation to launch a six-week pilot program geared toward boosting productiveness and bettering decision-making throughout numerous departments. This system noticed robust outcomes with 97 % of contributors utilizing the AI digital assistant throughout the pilot, 68 % have built-in it into their each day workflow, and contributors reporting saving a median of 12 hours per week on routine duties.
Exporting American AI
The flexibility to export our AI is important to sustaining our international competitiveness and making certain that our technological progress advantages not solely our nation, but additionally our allies and companions world wide. Constructing on latest AI diplomacy efforts, america affords a compelling and trusted worth proposition within the international know-how panorama.
American tech firms, together with Microsoft, are making unprecedented investments in AI infrastructure world wide. Microsoft alone is constructing AI infrastructure in additional than forty nations, together with areas the place China has targeted its investments. We urgently want a nationwide coverage that gives the correct steadiness of export controls and commerce help for these investments.
Whereas the U.S. authorities rightly has targeted on defending delicate AI elements in safe datacenters by export controls, an much more necessary aspect of AI competitors will contain a race between america and China to unfold their respective applied sciences to different nations. Given the character of know-how markets and their potential community results, this race between america and China for worldwide affect possible will likely be gained by the quickest first mover. The US wants a wise worldwide technique to quickly help American AI world wide.
This basic lesson emerges from the previous twenty years of telecommunications tools exports. Initially, American and European firms similar to Lucent, Alcatel, Ericsson, and Nokia constructed revolutionary merchandise that outlined worldwide requirements. However as Huawei invested in innovation and China’s authorities backed gross sales of its merchandise, particularly throughout the growing world, adoption of those Chinese language merchandise outpaced the competitors and have become the spine of quite a few nations’ telecommunications networks. This created the know-how basis for what later grew to become an necessary difficulty for the Trump Administration in 2020, because it grappled with the presence of Huawei’s 5G merchandise and their implications for nationwide and cybersecurity.
Early indicators counsel the Authorities of China is occupied with replicating its profitable telecommunications technique. China is beginning to supply growing nations backed entry to scarce chips, and it’s promising to construct native AI datacenters. The Chinese language properly acknowledge that if a rustic standardizes on China’s AI platform, it possible will proceed to depend on that platform sooner or later.
Worldwide partnerships will likely be vital. Because of this Microsoft has partnered with entities just like the UAE’s G42 and funding funds like Blackrock and MGX, aiming to boost as much as $100 billion for AI infrastructure and provide chains. American tech firms and personal capital markets are forging stronger ties with key nations and sovereign traders within the Center East, surpassing earlier efforts to counter Chinese language subsidies in telecommunications and reflecting our dedication to innovation and cooperation. Whereas China’s authorities could subsidize its know-how adoption in growing areas, it’s going to wrestle to match the size and influence of America’s non-public sector investments.
Pragmatic American export management insurance policies are important, balancing safety protections with the power to broaden quickly. Defending nationwide safety by stopping adversaries from buying superior AI know-how is essential. Guidelines ought to embody qualitative requirements for safe datacenter deployments to forestall chip diversion to China and guarantee superior AI providers are safeguarded. We help such a method.
Nonetheless, we’ve expressed our issues in regards to the quantitative caps imposed on GPU shipments by the interim remaining AI Diffusion Rule issued in January. These place key American allies and companions in a Tier Two class, imposing limits on AI datacenter enlargement. This consists of nations like Switzerland, Poland, Greece, Singapore, India, Indonesia, Israel, the UAE, and Saudi Arabia. Prospects in these nations now worry restricted entry to American AI know-how – probably benefitting China’s AI sector by turning to alternate options.
The Trump administration has a possibility to revise the rule, eliminating quantitative caps and retaining qualitative requirements. This method ensures American allies and companions stay assured in accessing American AI merchandise.
Finally, we have to acknowledge that nations world wide will use American AI provided that they’ll belief it. This creates obligations for American firms to develop and deploy AI infrastructure and merchandise in a accountable method that meets native wants. And it requires that nations believe in sustained and uninterrupted entry to vital AI elements and providers. The US has lengthy constructed a repute for reliable know-how that China has been unable to match. However this repute, like every little thing that actually issues, requires fixed consideration and care.
