The US is locked in a high-stakes race with China to develop artificial intelligence technology and can’t afford to slow down, venture capitalist Vinod Khosla said. He added that efforts to moderate the rate of progress, such as the hiatus in research advocated by leaders including Elon Musk, are misguided or even self-motivated. 
 

China has an advantage in moving technology forward because it “can take many more risks, make many more errors,” the founder of Khosla Ventures said in a meeting with Bloomberg News on Wednesday. “We shouldn’t take for granted we will lead in AI technology 20 years from now.”

Khosla believes that the country that dominates in AI will vastly increase its global influence: “We need to win this race.” At stake is “democracy and freedom of speech and a whole bunch of things all of us believe in,” he said. “I want those values to win.” 

Silicon Valley’s embrace of speed has at times run up against calls for moderation by regulators and AI ethicists. Lawmakers have scrambled to create a framework for regulating the powerful systems. And in March, Musk signed an open letter calling for a pause in the development of “giant AI experiments” for at least six months.

Khosla, an investor in artificial intelligence leader OpenAI, was skeptical of Musk’s motives for signing the letter. “I 80% suspect his call to slow down AI development was so he could catch up,” Khosla said. Musk, who recently incorporated an entity called X.AI, is already also working to develop AI robots and better AI technology for Tesla Inc. cars.

“Elon is behind,” Khosla said. “He realizes AI technology is really important to him both in the Tesla car” and in robotics. Khosla also called out companies like Tesla and Apple Inc. for doing significant business in China during a time of fierce competition with the US.

“Apple has the same problem,” he said. “They have too much business in China to offend the Chinese.”

Many tech leaders have become increasingly wary of China’s economic power, as geopolitical tensions have escalated. Last month, Khosla and fellow billionaire tech investor Peter Thiel hosted an event to discuss the country’s threat to the technology and military standing of the US. The closed-door dinner and discussion brought together policy makers from Washington with techies and investors from Silicon Valley on the eve of TikTok Chief Executive Officer Shou Chew testifying before Congress.

Still, some venture capitalists have built deep ties with the country. Sequoia China, for example, has seen significant success in the region with hits including TikTok parent company ByteDance Ltd. and Alibaba Group Holding Ltd. Khosla said he’s avoided investing in startups or raising funds from China because of Beijing’s long-term policies favoring Chinese startups over American ones, as well as philosophical concerns.

US officials have not publicly proved that TikTok is sharing information with the Chinese government. The company has said that China-based staff could access data of users from the US and elsewhere outside Asia, confirming an earlier press report, but it has also said American user data is stored in servers in the US and Singapore, not China.

Asked about Sequoia Capital’s ties to the country through its affiliate, Sequoia China, Khosla said: “I think they should subscribe to Western values.” But he added that Sequoia China was set up at a time when the relationship between China and the US was much more friendly.

A representative of Sequoia declined to comment. Musk and representatives of TikTok and Apple didn’t respond to requests for comment. 

Overall, despite geopolitical risks and technology stocks’ drubbing in the public markets, Khosla is optimistic about the future. Layoffs and budget cuts made by Alphabet Inc., Meta Platforms Inc. and other technology behemoths could fuel greater creativity in tech.

“They’re leaving to start companies,” he said of disillusioned workers trained at top companies. In five years, the businesses they start will “look like OpenAI.”

Khosla said that the current market would prove to be a profitable time for VC investing. Because of the high levels of innovation, his firm has funded more companies in the last three months than the last six to nine months, he said.

That’s in contrast to most VC firms, which have been cutting back in the current dour environment. Last quarter, VCs invested just $37 billion in US startups, less than half of the total the previous year.

Khosla, an early backer of green and environmental tech, also believes in the promise of that sector, although the type of businesses he backs has evolved over the years. Nuclear fusion research will render solar and wind obsolete, he believes, leading Khosla Ventures to back companies like Commonwealth Fusion Systems. Fusion, along with AI, is one of the technologies where the US needs to lead, he said.