Generative AI is rapidly redrawing the contours of global competition, forcing nations and corporations to rethink strategy amid rising geopolitical tensions, according to new insights from Boston Consulting Group (BCG) and its tech division, BCG X.

Senior BCG leaders recently outlined how AI is becoming a new front in global power dynamics, dominated by the U.S. and China but increasingly influenced by emerging “middle powers” and corporate actors navigating fragmented regulatory environments.

AI Strategy Now Entwined with Geopolitics

“For large companies, close to half—44%—have teams spread across multiple countries, not just where their headquarters are,” said Sylvain Duranton, Global Leader at BCG X. “These ecosystems were built long before the current wave of geopolitical friction.”

AI investment, particularly in compute infrastructure and large models, is already revealing deep imbalances. U.S. tech firms outstrip Europe’s market cap by a factor of 20, and Asia Pacific’s by five. Capital concentration is shaping not only innovation but also strategic dependence.

National AI Benchmarks: Superpowers in Focus

BCG’s Henderson Institute developed a benchmarking framework to assess national AI capabilities based on six enablers: capital, computing power, intellectual property, talent, data, and energy.

According to Nikolaus Lang, Global Leader at the Institute, the U.S. leads across most dimensions, from talent (500,000 AI specialists) and compute power (45 GW), to massive VC ($303 billion) and R&D spending ($212 billion). “Since 1950, the U.S. has produced 67% of notable AI models,” Lang said, bolstered by frameworks like the AI Diffusion Framework that restrict chip exports to rivals.

China, though constrained by chip access, is closing the gap. The country boasts the world’s largest mobile and e-governance data sources, 20 GW in compute capacity, and a dominant presence in AI academic institutions and patent filings. New models like DeepSpeech, trained with fewer resources, illustrate China’s growing efficiency.

Lang emphasized that “government involvement in AI funding will only increase,” especially as private R&D costs soar.

The Rise of AI Middle Powers

Several “middle powers” are also making notable progress:

• European Union: Home to the second-largest AI talent pool (275,000) and strong in academic output, but fragmented in capital and compute. BCG sees potential if AI, defence, and renewables are strategically bundled.
• Middle East: Countries like the UAE and Saudi Arabia are investing sovereign wealth in AI infrastructure and talent attraction, leveraging cheap electricity and favourable policies to become “AI builders from scratch.”
• Asia (Japan & South Korea): These tech powerhouses are leaning on robust R&D ecosystems. South Korea’s Samsung and Japan’s SoftBank are among the most active private investors in local AI development.
• Singapore: Small but strategic, Singapore is nurturing its AI ecosystem through public investment, regional leadership in LLM development, and workforce upskilling.

What Comes Next: Strategy, Sovereignty, and Risk

BCG identifies four major dynamics shaping the AI geopolitical landscape:

1. U.S. dominance remains unmatched due to deep ecosystem advantages.
2. China is rapidly gaining ground, especially through state-backed R&D and data advantages.
3. Middle powers must choose between building supply (infrastructure, models) or accelerating adoption.
4. Governments will become primary funders as GenAI commoditisation accelerates and private capital looks to mitigate geopolitical exposure.

Multinational corporations, meanwhile, are beginning to hedge their AI bets, diversifying model providers and compute sources to reduce geopolitical risk.

In this emerging landscape, the intersection of AI innovation, national policy, and corporate strategy will determine who leads—and who lags—in the generative era.