Brad Smith, president and vice chair of Microsoft

Microsoft president Brad Smith has once again raised his China warning. Speaking in an interview on the sidelines of the AI Impact Summit in New Delhi, Brad Smith said that American tech companies should “worry a little bit” about the subsidies their Chinese competitors receive from their government in the AI race. “I do think we always have to think about, maybe even worry a little bit about Chinese subsidies.” The Chinese government supports AI companies in various ways including via a multi-billion-dollar national investment fund and vouchers for cheaper energy for their computing needs.Smith said that subsidies from Beijing to Chinese companies were “the fundamental approach that China successfully took to disrupt the telecommunications market,” when state money and support helped companies like Huawei and ZTE expand. Microsoft president took the example of how the rise of Chinese-government supported telecom companies ZTE and Huawei resulted in the disappearance of some American and European companies as they could not fight strong competition from them. “Some American companies disappeared. European companies like Ericsson and Nokia were thrown on the defensive,” Smith added.Coming to the current scenario, where data centers have emerged as the most important part of AI infrastructure, Smith said that data centers from Chinese companies Huawei and Alibaba exist around the world and “it will not be difficult for China to subsidize those.” “I think for the rest of us, we have to compete with that, and we have to be good at competing with that, with the support of our governments,” Smith said.THis is not the first time that Smith has spoken about how the Chinese government’s support to their companies puts American companies at a disadvantage. Earlier this year, he told Financial Times that the rapid adoption of Chinese AI start-up DeepSeek’s technology in emerging markets such as Africa underscores the competition that American companies face around the world. “We have to recognise that right now, unlike a year ago, China has an open-source model, and increasingly more than one, that is competitive,” he said. “They benefit from subsidisation by the Chinese government. They benefit from subsidies that enable [them] to basically undercut American companies based on price.”

When DeepSeek shocked America

“If we rely on private capital flows alone, I don’t think that will be sufficient to compete with a competitor that is subsidised to the degree that Chinese companies often are, especially in those parts of the world,” he said. “Africans can’t afford very expensive solutions apart from open source, so you have to go to [Meta’s] Llama or Chinese options,” he said then. “What we do have is, as American companies, a stronger reputation for trust. We have access to better chips than the Chinese companies do . . . [but] you always have to compete on price,” Smith added.DeepSeek shocked Silicon Valley in January 2025 when it introduced its powerful AI reasoning model R1, which it claimed was trained at a lower cost with less computing power. DeepSeek’s claim wiped hundreds of billions from the US stock market.

Microsoft has banned employees from using China’s DeepSeek

Microsoft does not allow its employees to use an artificial intelligence app developed by Chinese AI startup DeepSeek, due to concerns related to data vulnerability as well as Chinese propaganda, President Brad Smith last year. Speaking at a Senate hearing on winning the AI race in May 2025 with China, Smith said that the company also doesn’t carry DeepSeek’s application in its app store, flagging risks posed by “data going back to China and the app creating the kinds of content that people would say are associated with Chinese propaganda.“