Microsoft has cautioned that U.S. artificial intelligence firms are losing ground to Chinese competitors in markets outside the West, as China rolls out low-cost, open AI models supported by substantial state subsidies. The warning was reported by the Financial Times on Tuesday.
Microsoft President Brad Smith told the newspaper that the rapid adoption of Chinese start-up DeepSeek across emerging economies, including parts of Africa, underscores how global competition in AI is intensifying.
Smith noted that China has developed highly competitive open-source AI models that benefit from government financial support. This backing allows Chinese companies to offer cheaper alternatives, putting pricing pressure on U.S. rivals trying to expand internationally.
Research conducted by Microsoft and cited by the Financial Times showed that the release of DeepSeek’s R1 large language model last year significantly accelerated AI adoption across the global south, largely due to its affordability and ease of access.
The data suggests that China has now moved ahead of the United States in the open AI model segment—systems that are typically free to use, modify, and deploy. Microsoft’s analysis estimated that DeepSeek holds an 18% market share in Ethiopia and 17% in Zimbabwe, with even stronger penetration in countries where access to U.S. technology is limited.
Smith also warned that without increased investment in data centres, energy infrastructure, and workforce skills, the widening AI gap could deepen economic inequality between developed and developing regions, according to the report.
