“What we’re seeing unfolding in real time is nothing short of a tech war between the U.S. and China,” Helberg, who also leads the U.S.-China Economic and Security Review Commission, which advises Congress about national security matters, told CNBC Friday. 

Helberg argued that as China and the U.S. continue to develop AI for military applications, there will be a split “into a Chinese-led technology world and an American-led technology world.”

His concerns may indeed be valid, but his company, Palantir, relies on U.S. military and government contracts that are related to AI for nearly 60% of its revenue and would likely benefit from a China-U.S. tech war. In the second quarter, Palantir’s total revenue was $533 million, of which $302 million came from the government. The firm has major contracts with the U.S. Special Operations Command, the U.S. State Department, the U.S. Department of Defense, and multiple other agencies to provide software and AI applications for military use.

Still, if you ask Helberg, “the U.S. and China are in a race for global leadership in artificial intelligence,” and after falling behind for years, China is catching up. Helberg argued that the U.S. military still leads the People’s Liberation Army (PLA) in aerial applications of AI such as drones, but the PLA is “highly competitive” in computer vision and underwater autonomous drones.

“The leadership in Washington and Beijing both understand that AI is the single most consequential, breakthrough, paradigm-shifting technology in military affairs in 80 years,” he said. “And China views AI as essential to leapfrogging U.S. military capabilities, particularly in the Indo-Pacific.”

Beyond the AI tech war, Beijing banned public officials from using iPhones this week in another sign of increasing tensions between the world’s superpowers and growing suspicion of U.S.-based companies in China. China’s new restriction comes after President Biden banned the sale of Huawei Technologies and ZTE telecommunications equipment in the U.S. last year owing to surveillance concerns, calling the firms’ products an “unacceptable risk” to U.S. national security. 

“We’re seeing these restrictions on [the use of] iPhones and Teslas by government employees as not only retaliations against American restrictions, but also as reflective of that growing mistrust that the U.S. government could use its influence over American companies for geopolitical purposes,” Helberg said of the decision to ban government employees from using iPhones and American EVs, arguing that Beijing has begun to question the separation between the private and public sector in the U.S. 

The semiconductor, or chip, industry is another tech battleground between the U.S. and China. For years, China’s development of the critical semiconductors that power everything from phones to fighter jets lagged behind the West (and Taiwan, which it considers to be a breakaway province). And in their quest to catch up, Chinese firms were caught multiple times stealing intellectual property, leading the Biden administration to enact export controls in October in order to restrict China’s ability to purchase advanced chips. President Biden also signed a new executive order last month to ban U.S. investments in Chinese semiconductor, quantum technology, and A.I. sectors.

But since then, Chinese tech giant Semiconductor Manufacturing International Corp. (SMIC) achieved an important milestone by creating an advanced 7-nanometer processor that nears the capabilities of some of the West’s best chips to power Huawei’s latest smartphone. 

Angelo Zino, senior equity analyst at CFRA Research, believes the new developments increase the probability of further U.S. restrictions on Chinese semiconductor manufacturers in another escalation of the tech war.

“We question whether the SMIC/Huawei relationship violated U.S. sanctions given the performance/capabilities the device has obtained,” he said, implying—as Wisconsin Rep. Mike Gallagher stated publicly this week—that SMIC’s new chip could not have been produced without using U.S. technology.

As a result, Zino said: “We now see a greater than 50% probability that the U.S. will look to implement greater chip restrictions on the two firms, at the very least (likely extending beyond).”