Microsoft Highlights Growing Chinese Influence in AI Across Emerging Markets

Microsoft has raised concerns about China's expanding role in the field of artificial intelligence (AI) within emerging markets, warning that state-backed Chinese tech providers are rapidly outpacing U.S. companies, particularly through aggressive pricing and government subsidies.

Microsoft's leadership has identified an increasing disparity, often referred to as an "AI gap," between Western and Chinese AI providers in developing regions. This shift has become especially pronounced since the introduction of China's DeepSeek AI model, which has achieved notable cost efficiencies and competitive capabilities. These advancements, bolstered by significant government support, have enabled Chinese AI firms to secure dominant market positions in multiple countries.

Data collected by Microsoft indicates that DeepSeek has gained substantial market share in nations such as Ethiopia and Zimbabwe, where its adoption rates have reached 18% and 17% respectively. In countries subject to U.S. export restrictions, such as Belarus, Cuba, and Russia, DeepSeek's presence is even more pronounced, with market shares reported at 56%, 49%, and 43% accordingly.

Chinese AI providers have leveraged open-source approaches as part of a broader strategy to circumvent international sanctions and restrictions. This contrasts with many U.S.-based competitors, including companies like OpenAI, Google, and Anthropic, which primarily offer proprietary subscription-based AI models. Microsoft notes that economic constraints in many developing countries make open-source and lower-cost solutions from China particularly attractive to local users who may not have access to premium, paid services from Western firms.

Microsoft emphasizes that this dynamic is reminiscent of China's earlier expansion in the telecommunications sector, where heavy state subsidies propelled companies like Huawei to international prominence. In that instance, Western technology companies lost significant ground as Chinese firms leveraged government support to scale rapidly and undercut competitors on price, raising broader concerns over long-term technological dependency and security.

To address the current challenge in the AI sector, Microsoft advocates for international development banks and global institutions to invest in supporting AI infrastructure and innovation in emerging markets. The company argues that such efforts are necessary to ensure a diversified competitive landscape and to prevent the consolidation of Chinese influence in critical technology domains.

At the same time, Microsoft asserts that it is not seeking direct state subsidies for U.S. AI firms. Instead, it calls for regulatory frameworks and export controls that allow American companies to remain competitive globally, without inadvertently restricting their ability to operate in key growth markets. Microsoft reports that it has allocated approximately $80 billion to global AI data center investments in the past year, with more than half directed toward U.S.-based infrastructure.

The ongoing competition is expected to intensify further with the anticipated release of an updated DeepSeek model, which could enhance China's technological lead in certain regions. This next-generation AI product is expected to launch ahead of the Chinese New Year, potentially accelerating adoption and expanding China's footprint in emerging digital economies.

Microsoft's warning underscores the strategic importance of AI in global technology leadership and highlights the complex interplay between policy, economics, and innovation in shaping the future of digital infrastructure worldwide.