Editor’s notice: On Thursday, Might 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.
Profitable 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 crucial situation of synthetic intelligence. I’m Brad Smith, the Vice Chair and President of Microsoft Company.
AI has the potential to change into essentially the most great tool for individuals ever invented. Like the overall objective applied sciences that preceded it, resembling electrical energy, machine instruments, and digital computing, AI will affect each a part of our economic system. It would form not simply how we work and reside, 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 wish to speak at the moment about what is required to win this race.
The AI race entails 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 convey collectively all of the substances wanted for fulfillment.
It’s a race that no firm or nation can win by itself.
To win the AI race, the USA might want to assist the personal sector at each layer of the AI tech stack. The nation might want to companion with American allies and buddies world wide.
In my testimony at the moment, I’ll give attention to three strategic priorities the place this Congress and the federal authorities will make a distinction.
First, the nation should win the AI innovation race. This can require huge datacenters and AI infrastructure that want federal assist to develop and modernize {the electrical} grid on which they rely. The nation should recruit and prepare expert labor like electricians and pipefitters which can be in brief provide. All of us should summon the very best of our researchers at nationwide labs and universities, supported by federal fundamental analysis packages and partnerships which have change into the envy of the world. We might want to proceed to excel in shifting revolutionary concepts from tutorial labs into firms and new merchandise. And we might want to assist AI builders with open and broad entry to public knowledge.
Second, the nation should win the AI diffusion race. This can require that we promote broad AI adoption that can allow productiveness progress throughout each sector of the economic system. Greater than something, this requires new initiatives to advertise the AI skilling of the American workforce. This can contain fundamental AI fluency in our faculties and new AI coaching packages in our group faculties. It would additionally embrace superior AI schooling that can signify the following technology of laptop science levels, organizational expertise that will likely be mastered within the nation’s enterprise faculties, and new programs within the nation’s regulation faculties. 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, the USA 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 international locations. 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 international locations that they may have dependable and sustained entry to crucial 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 Common Function Know-how
Economists generally put applied sciences into two classes, common objective 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 properly. However over the course of historical past, sure so-called common objective applied sciences affect and generally even redefine virtually each sector of the economic system. Electrical energy is the prototypical instance, as a result of when you concentrate on it, electrical energy modified the way in which each financial sector works.
The important thing to mastering the way forward for AI begins partially by understanding the function know-how has performed up to now. The previous three centuries have introduced the world three industrial revolutions, every pushed by these common objective 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 the USA overtook the UK by placing these applied sciences to work extra broadly than every 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 world chief in advancing a common objective know-how offers a rustic a serious edge. However one lesson of historical past is that the international locations that profit essentially the most and advance the quickest usually are not essentially the international locations the place the know-how is invented. Somewhat, it’s the place the know-how is subtle – or adopted – essentially the most shortly and broadly. That is for good motive. If a know-how improves productiveness and modifications each a part of an economic system, then the nation that makes use of it essentially the most broadly and shortly will profit essentially the most.
This each frames and defines the AI alternative and problem for the USA. 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 common objective applied sciences, is constructed on what we within the business name a tech stack – a stack of applied sciences which can be used collectively. That is true for each nice common objective know-how. You’ll be able to 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 mild a lightbulb. However the illumination of lights throughout a metropolis shortly required the development of energy vegetation, 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. Briefly, a tech stack for electrical energy.
Synthetic intelligence equally is constructed on an AI tech stack. Essentially, it’s divided into three layers, infrastructure, the platform layer, and functions. You’ll be able to see this illustrated under.
The infrastructure layer is very large. Microsoft is spending greater than $80 billion this fiscal 12 months on the capital funding wanted for this layer, with greater than half this quantity being spent in the USA. 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 usually datacenter campuses with many buildings with probably tons of of hundreds of computer systems. This infrastructure helps each the coaching of recent AI fashions and their deployment, to allow them to be used for AI-based providers world wide.
On high 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 corporations – 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 technology of software-based AI platform providers which can be used to assist construct AI functions.
In the end, each the infrastructure and platform layers assist the functions layer. These are gadgets and software program functions that use AI to ship higher providers to individuals. ChatGPT and Microsoft’s Copilot are each examples of AI functions. One of many superb issues concerning the functions layer is it’s not simply firms – giant or small or established or startup – which can be creating AI functions. It’s everyone. It’s researchers utilizing new AI-infused functions to vary drug discovery. It’s non-profits altering the way in which they ship providers. It’s academics utilizing AI as a software to enhance the way in which they put together materials for a classroom. It’s governments making every part 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 economic system, it’s crucial 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 individuals can develop and deploy the fashions on the platform layer. It’s important to make use of the AI fashions so that folks will construct the functions on high of them. And it’s important for purchasers to undertake the functions, so the market can develop, and drive elevated funding to develop the infrastructure additional. The method repeats itself. That is how a brand new economic 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 personal sector at the moment is pursuing in the USA higher than in every other nation. And it’s what this Congress and the Government Department can assist assist 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. As we speak’s panel, involving main corporations resembling OpenAI, AMD, CoreWeave, and Microsoft, displays necessary slices of the brand new AI economic system. The AI economic system requires a multifaceted and built-in ecosystem that features “Large Tech” and “Little Tech,” startups and extra established corporations, open supply and proprietary builders, suppliers and clients, corporations that create knowledge and corporations that devour it, all working collectively. Governments as each regulators and main AI adopters have crucial roles to play.
Commentators generally give attention to the tensions between completely different contributors on this tech ecosystem. These deserve consideration. What’s usually neglected is that the completely different contributors additionally depend upon one another. And which means the completely different contributors to the AI ecosystem all should be wholesome.
A big know-how firm like Microsoft has a singular alternative – and accountability – to companion with and assist the contributors at each degree of the tech stack. We try to advance not simply innovation however an financial structure, enterprise fashions, and accountable practices that can assist develop the AI market on a long-term foundation. Not only for the USA, however the nation’s buddies and allies.
Profitable the Innovation Race
Though the AI economic system is being constructed largely by the personal sector, authorities insurance policies and initiatives have to play a crucial function. This begins with work wanted to assist gasoline innovation. Just a few 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 enormous quantities of electrical energy to function.
America’s superior economic system depends on 50-year-old infrastructure that can’t meet the growing 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 sources, onshore our provide chains, and modernize our electrical grid to assist forecasted will increase in electrical hundreds. 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 usually contain a number of companies and complicated, unpredictable, multi-year evaluations. This hinders progress. The federal authorities ought to take quick steps to ascertain dependable, cheap, and clear timelines for allowing selections. This can be performed by standardizing federal allowing processes and designating a lead company to shepherd the permits by way of 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 assessment and decision-making course of.
We have been happy to see President Trump’s current Government Order, “Updating Allowing Know-how for the 21st Century,” directing companies to make most use of know-how within the environmental assessment 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 develop America’s power grid. We have to acknowledge that new investments within the grid are simply as necessary at the moment as they have been a century in the past, when the USA led the world in personal and public sector assist for electrical energy.
Develop the AI Infrastructure workforce
Maybe the one greatest problem for knowledge heart growth in the USA is a nationwide scarcity of individuals – together with expert electricians and pipefitters. Electricians, for instance, are important to datacenter building, putting in a posh system {of electrical} panels, transformers and backup energy techniques. We’ve got employed hundreds of electricians throughout the nation, together with in Arizona, Georgia, Virginia, Washington, and Wisconsin. However the USA doesn’t have sufficient electricians to fill the rising demand. We estimate that over the following decade, the USA might want to recruit and prepare half 1,000,000 new electricians to satisfy the nation’s rising electrical energy wants. We’d like a nationwide technique to make sure we meet this chance for American staff.
These are good jobs that can present nice long-term careers for individuals throughout the nation. We advocate making present federal schooling and coaching funds, in addition to tax incentives, obtainable to scale up these alternatives. These might embrace concentrating on present federal apprenticeship investments in areas which have recognized main AI infrastructure initiatives and supporting present coaching facilities to shortly enhance the variety of registered apprenticeships centered on electricians.
We commend President Trump’s current 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 way in which to satisfy this second. As federal companies work to implement the order, it will likely be crucial that business forecasters and union coaching facilities work collectively to maximise affect.
In the end, we want new steps at each degree of presidency and in communities throughout the nation. For instance, we have to do extra as a nation to revitalize the economic arts and store lessons in American excessive faculties. This must be a precedence for native faculty boards and state governments. Equally, the nation’s group faculties might want to do extra to assist a nationwide initiative to assist prepare a brand new technology of expert labor, together with electricians and pipefitters.
Put money into AI analysis and growth
To uphold America’s place as a world 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 choices made many years in the past to publicly fund analysis infrastructure and supply monetary assist to gifted scientists and entrepreneurs paved a pathway to American technological management. Via federal, state and native authorities initiatives, investments have been made in regional economies and packages, betting on the ingenuity of the American individuals. Notable incubators of the 20th century – resembling Bell Labs and the community of federal nationwide laboratories – have been the results of deliberate efforts to unite business, authorities, and academia to propel scientific development. We should deploy an analogous technique at the moment for AI and quantum applied sciences. Investments in these areas are crucial to advancing the event of revolutionary technological options that handle complicated world challenges.
To outcompete nations like China, which have considerably boosted their analysis and growth (R&D) investments, the USA should speed up strategic investments in scientific analysis for future applied sciences. Consultants predict China will proceed to take a position substantial sources in next-generation applied sciences resembling AI, superior manufacturing, clear power, quantum computing, and semiconductors over the following decade.
Because the Second World Conflict, America’s technological innovation has been pushed by R&D primarily based on two crucial substances that the remainder of the world has each studied and envied. The primary is sustained assist for fundamental analysis. Whereas just a few tech firms make investments substantial sums in fundamental analysis, as we do by way of Microsoft Analysis (MSR), most world-leading fundamental analysis is pursued by teachers at American universities, usually primarily based on funding from the Nationwide Science Basis and different federal companies. Pushed by curiosity somewhat than a revenue motive, this analysis usually results in surprising however profound discoveries which can be revealed publicly.
The second ingredient is a sustained dedication to investments in product growth by firms of all sizes. The US, greater than every other nation, has mastered the method of shifting new concepts shortly from universities to the personal sector. This success rests on wholesome investments in each R and D, recognizing that fundamental analysis is usually publicly funded and sometimes in universities, whereas product growth is robustly and privately funded by way of firms. It’s the mixture of the 2 that makes American R&D so profitable.
In 2019, President Trump permitted an govt order designed to strengthen America’s lead in synthetic intelligence. It rightly centered on federal investments in AI analysis and making federal knowledge and computing sources extra accessible. Six years later, the President and Congress ought to develop on these efforts to assist advancing America’s AI management. Extra funding for fundamental 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 knowledge instantly determines the energy 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 the moment, many of those datasets are both inaccessible or not usable for AI growth.
By making authorities knowledge available for AI coaching, the USA can considerably speed up the development of AI capabilities, driving innovation and discovery. Opening entry to those datasets would enable for the evaluation of themes, patterns, and insights throughout broad datasets, propelling the nation to the forefront of world AI growth.
Importantly, accessible public knowledge ranges the enjoying subject. 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.
As compared, international locations like China and the UK are already investing closely of their knowledge sources, 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 world development of treating knowledge as a standard good for financial competitiveness.
Profitable the AI Diffusion Race
Historical past teaches us that the true affect of a general-purpose know-how is just not measured solely by the caliber of its main innovations, however by how shortly, extensively, 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 night time in a room illuminated by a candle or kerosene? But tonight, virtually 150 years later, greater than 700 million individuals on the planet nonetheless reside with out electrical energy of their properties. 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 talents wanted to make use of new know-how, each as people and throughout organizations. It’s straightforward to underestimate each the function that skilling performs and the necessity for public coverage to assist it. However in every industrial revolution, the nation that greatest harnessed the main general-purpose know-how of its time was the nation that expert its inhabitants essentially the most shortly and broadly.
Talent the American workforce
Within the new AI economic system, People of all backgrounds will want crucial AI expertise to compete. To fulfill the totality of the skilling problem, the nation should pursue a brand new nationwide objective to make AI skilling accessible and helpful for each American. This can require a really broad vary of partnerships and new coverage concepts, spanning throughout geographic, organizational, financial, and political divides.
President Trump’s current govt orders centered on AI schooling and the workforce present crucial steps in direction of a nationwide skilling technique for AI. The “Advancing Synthetic Intelligence Schooling 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 faculty districts to encourage AI studying and literacy in Ok-12 schooling.
Companies and non-profits have necessary roles to play. At Microsoft, we’re in search of to do our half to satisfy this skilling problem. In 2025 alone, we’re on a path to coach 2.5 million People in fundamental AI expertise. 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 way of 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 can embrace assist for AI schooling in area people faculties.
In terms of AI skilling, an important factor we have to do is acknowledge that it is a crucial subject that’s ripe for consideration, studying, partnership, and innovation. It would have a huge effect on broadening entry to this know-how throughout our economic 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 packages and assist. It is a first-class precedence that deserves as a lot consideration and assist as innovation in AI know-how itself.
Encourage AI adoption
The federal authorities additionally will play a crucial 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 current OMB publication of M-Memos centered on federal authorities use and procurement of AI. Each memos emphasised the significance of eradicating boundaries 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 properly. We partnered with the Texas Division of Transportation to launch a six-week pilot program aimed toward boosting productiveness and enhancing decision-making throughout varied departments. This system noticed robust outcomes with 97 % of contributors utilizing the AI digital assistant in the course of the pilot, 68 % have built-in it into their every day workflow, and contributors reporting saving a mean of 12 hours every week on routine duties.
Exporting American AI
The flexibility to export our AI is crucial to sustaining our world competitiveness and making certain that our technological progress advantages not solely our nation, but in addition our allies and companions world wide. Constructing on current AI diplomacy efforts, the USA affords a compelling and trusted worth proposition within the world 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 international locations, together with areas the place China has centered its investments. We urgently want a nationwide coverage that gives the correct stability of export controls and commerce assist for these investments.
Whereas the U.S. authorities rightly has centered on defending delicate AI elements in safe datacenters by way of export controls, an much more necessary component of AI competitors will contain a race between the USA and China to unfold their respective applied sciences to different international locations. Given the character of know-how markets and their potential community results, this race between the USA and China for worldwide affect possible will likely be gained by the quickest first mover. The US wants a wise worldwide technique to quickly assist American AI world wide.
This basic lesson emerges from the previous twenty years of telecommunications tools exports. Initially, American and European firms resembling Lucent, Alcatel, Ericsson, and Nokia constructed revolutionary merchandise that outlined worldwide requirements. However as Huawei invested in innovation and China’s authorities sponsored 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 international locations’ telecommunications networks. This created the know-how basis for what later turned an necessary situation 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 excited by replicating its profitable telecommunications technique. China is beginning to provide growing international locations sponsored 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 crucial. Because of this Microsoft has partnered with entities just like the UAE’s G42 and funding funds like Blackrock and MGX, aiming to lift 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 might subsidize its know-how adoption in growing areas, it’s going to wrestle to match the dimensions and affect of America’s personal sector investments.
Pragmatic American export management insurance policies are important, balancing safety protections with the flexibility to develop quickly. Defending nationwide safety by stopping adversaries from buying superior AI know-how is essential. Guidelines ought to embrace qualitative requirements for safe datacenter deployments to stop chip diversion to China and guarantee superior AI providers are safeguarded. We assist this sort of method.
Nonetheless, we’ve expressed our considerations concerning 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 growth. This consists of international locations like Switzerland, Poland, Greece, Singapore, India, Indonesia, Israel, the UAE, and Saudi Arabia. Clients in these international locations now concern 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.
In the end, we have to acknowledge that international locations world wide will use American AI provided that they will belief it. This creates duties for American firms to develop and deploy AI infrastructure and merchandise in a accountable method that meets native wants. And it requires that international locations have faith in sustained and uninterrupted entry to crucial AI elements and providers. The US has lengthy constructed a fame for reliable know-how that China has been unable to match. However this fame, like every part that actually issues, requires fixed consideration and care.
