Your AI compass

AI is transforming industries, economies, and regulations at lightning speed. Stay ahead with our monthly LinkedIn newsletter - insights and trends on the second Thursday of each month.

1. Sanctions could drive more innovation

Global tensions are exacerbating the already fierce contest in AI innovation. China looks set to tighten its tech restrictions in response to US tariffs, which could further drive development of competitive home-grown AI models. "President Xi chairing a recent symposium with China's top private sector CEOs, including the CEO of DeepSeek, further underscores the critical importance of tech innovations in driving the nation's growth and achieving its technological ambitions,“ observes Justina Zhang, TMT Partner, Kewei. Meanwhile, the US is rethinking its sanction strategy following DeepSeek’s disruptive breakthrough. “Sanctions may restrict access, but they can also lead to creative problem-solving; DeepSeek’s apparent success in optimising its algorithms for constrained chips is a prime example of this paradox," notes Veronica Roberts, UK Regional Head of Practice for Competition, Regulation and Trade. Winning the so-called AI arms race is no longer just about having superior technology; it’s about adapting fast and turning obstacles into opportunities.

2. Open-source may not impact investment

This year has already seen a flood of AI funding announcements as countries race for dominance. The EU’s recent $320 billion commitment seeks to level the playing field after the US’ $500 billion Stargate plan, the UK’s £14 billion AI Action Plan, China’s $8.2 billion AI investment fund, and Singapore’s $10 billion investment pledges on chips. However, some experts have questioned what DeepSeek's open-source nature means for investment in closed-source providers. “Rather than undermining investment in closed-source systems, open-source AI like DeepSeek can serve as a complementary force, accelerating innovation while ensuring that proprietary solutions continue to meet enterprise-specific needs,” notes Aaron White, Head of TMT Asia. The Elon Musk-led bid for OpenAI  provides early indication that closed-source systems may retain their value in the face of open-source innovations. "It is possible that ensuing legal battles related to DeepSeek's model could yet impact the investment landscape, however, with OpenAI alleging that DeepSeek used its work to develop its model,” cautions Martin Hevey, UK AI Advisory Co-Lead.

3. Regulators change gear on policy shifts

Regulators are recalibrating as policymakers increase their focus on driving AI growth. The EU has withdrawn the AI Liability Directive as part of its rollback of tech regulations to spur AI investment, in the face of the US pushing an 'America first' tech policy that's designed to boost domestic innovation. “While it’s crucial to encourage AI investment, policymakers must ensure they strike a balance between regulation that is calibrated to provide innovation incentives and the necessary protections for consumers navigating these powerful technologies,” states Julian Lincoln, Head of TMT & Digital Australia. The UK has said that it’s not changing tack, with the government having previously stated that its sector-led approach to regulation already balances AI innovation with safety. “This comes as no surprise given the Labour government's growth agenda; many businesses take the view that regulation is not necessarily anti-innovation, instead recognising that it can provide the certainty needed to fuel investment,” notes Jasveer Randhawa, Public Law Knowledge Counsel.

4. Grid demand fuels nuclear future

The explosive rise of AI is demanding an infrastructure revolution. Some countries are forging ahead, such as the UAE and France, which have committed to develop a huge one gigawatt data centre. But powering these facilities remains a challenge, with the US struggling to expand its grid capacity to accommodate its AI agenda. "The rise of AI has placed considerable demand on compute capacity and the energy that fuels it; scalable infrastructure and energy innovation that deliver cheap, reliable, and sustainable power will be more critical than ever to meet this demand without constraining further AI advancement," notes Kwok Tang, TMT Sector Co-Head. As governments wrestle with these issues, Big Tech is increasingly taking the lead by investing in nuclear power to satisfy demand forecast for data centres. "With tech firms driving a new wave of investment in small and micro modular nuclear reactors (SMRs), we should expect to see policymakers adapting nuclear regulations for much faster deployment and fleet creation to remain competitive", continues Paul Butcher, Director of Public Policy.

5. Experts fear 'safety second' approach

Despite increasing regulatory attention on AI guardrails, experts continue to warn about the dangers of the technology, and fear safety is still being overlooked in the race to develop new models. Researchers from Cisco and UPenn found DeepSeek's safety guardrails failed every test thrown at its chatbot, raising serious concerns about content moderation. Meanwhile, the UK and US refused to sign the AI declaration at the Paris AI Summit, in what some are arguing is evidence of innovation being prioritised at any cost. "Safety is too often sidelined in the race to the top; innovating without appropriate guardrails is a dangerous gamble that can ultimately result in reputational damage, erode public trust, and hinder success," says Nick Pantlin, Head of TMT & Digital UK and Europe. With the increasing prevalence of deepfakes and security flaws, consumers and businesses are encountering very real risks of harm. "It is now imperative for all organisations to revise their internal AI risk management processes to ensure they are developing and using AI technologies in a safe, secure, and robust manner," notes Alexander Amato-Cravero, Director of Emerging Technology Advisory and Legal Operations Advisory. "Best practice in AI governance is evolving – and will continue to do so rapidly – as leaders start to see how AI risks manifest and aggregate across their business," concludes Susannah Wilkinson, Director of Generative AI (Digital Change).

Don’t get left behind

Subscribe for more expert insights on AI trends and join the conversation.