Former Google LLC CEO Eric Schmidt has issued a strong warning to American companies and policymakers about the growing threat posed by China’s open-source artificial-intelligence models. He suggests that U.S. firms could lose ground not because Chinese systems are definitely better, but because they are more accessible and free to deploy globally.
Access Versus Control: Why Schmidt Sees a Strategic Shift
During a recent appearance on the “Moonshots” podcast, Schmidt lamented that most leading American models are closed-source and monetised, whereas major Chinese models are open-source and freely downloadable.
This produces a bizzare outcome where the biggest models in the United States are closed source and the biggest models in China are open-source,
The geopolitical issue there, of course, is that open source is free and the closed models are not free.
The vast majority of governments and countries who don’t have the kind of money that the West does will end up standardising on Chinese models not because they’re better, but because they’re free,
– Eric Schmidt, Ex-Google CEO
This dynamic, he argues, creates a structural disadvantage for U.S. firms and Western governments in the race for AI dominance. While U.S. organisations focus on proprietary, paid models, many countries, especially emerging markets, may opt for free, open alternatives simply to avoid licensing costs and barriers.
Implications for U.S. Companies and Global Alliances
Schmidt’s warning carries several layers of consequence for both businesses and geopolitics. On the commercial front, American firms that depend on paid or closed models risk losing global influence if alternatives from China proliferate widely and become entrenched in public-sector, enterprise, or government use. From a policy perspective, reliance on Chinese AI systems could expose nations to dependencies that affect sovereignty, data governance, and digital strategy.
For U.S. companies, the message is clear: innovation isn’t enough if access and adoption are constrained by cost or licensing. The West may need to rethink its model of closing the technology in favour of broader distribution strategies or risk missing the global standardisation wave.
Why This Warning Matters Now
The timing of Schmidt’s comments is critical. China’s open models, like those from Alibaba Group (Qwen 3) and DeepSeek, have rapidly found adoption in developer ecosystems and emerging markets. Meanwhile, U.S. players continue to prioritise closed-source frameworks, higher licensing fees, and more controlled deployment. This raises a question of contrast: are we witnessing a model of innovation (closed, premium) versus a model of scale and ubiquity (open, accessible)?
In the context of global digital infrastructure, this could mark a pivot point, where open-access tools set the de facto standards and closed models become niche, premium options. For many governments and companies in developing regions, cost considerations already shape procurement and adoption decisions.
A Call for a New Strategy, Not Just More Investment
Schmidt’s perspective goes beyond mere urgency; it suggests a need for strategic recalibration. Investing billions in frontier models may be less effective if those systems remain locked behind fees while competitors deploy widely and freely. Western stakeholders may need to adopt a dual strategy: maintain high-end performance models, but also support open-source alternatives or hybrid models that champion accessibility and global diffusion.
For younger tech firms and startups, this could open up strategic paths: contributing to or building upon open frameworks may reach wider markets faster, and may influence the underlying infrastructure that many will use.
What remains to be seen is whether the U.S. and its allies heed this warning in time. If not, the current competitive edge could erode not because of inferior tech but because of inferior access.
Source: Business Insider
