I gave my image editor the day off and instead asked (a US-based) AI to make the image for this post – it seemed appropriate.

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This week at the opening of London Tech Week, Jensen Huang, Nvidia’s CEO, highlighted the strength and depth of the UK’s AI ecosystem, praising its researchers, universities and startups.

This is good news and shows how the UK excels in technology in so many ways, most prominently in its leading universities.

Unfortunately, this is where the good news comes to a crashing halt.

Politely, given that he was at the time sitting next to the UK Prime Minister, Keir Starmer, Mr Huang went on to say that the UK’s “AI ecosystem” was poised for take-off but was missing one key thing, “its own infrastructure”.

I was not at the conference, so I don’t have a first-hand interpretation of what he meant. To be absolutely clear, what he actually said was"

“It was surprising, this is the largest AI ecosystem in the world without its own infrastructure.”

Let me give you an idea of what I think he meant and why it is both refreshing and deeply frustrating to hear this.

We excel at research. But we’ve failed — systemically — at everything that comes next.

Those of you who have read my previous blogs or might have followed my interest in, and in a different life, investment in, some of the UK’s leading science and technology spin-offs may remember my criticisms of the UK’s broader technology infrastructure. In a nutshell, we lead the world in many ways in science and technology research and development, reflected in the global university league tables, where the UK has three of the top ten in the world, including Oxford, Cambridge and UCL in London.

But woefully and unforgivably, as a nation, we have abjectly and objectively failed to turn this scientific excellence to which Mr Huang referred again, into a viable and thriving commercial technology sector.

All one needs to do is look at the FTSE 100 index or indeed at the wider mid cap index to see that the UK's tech and AI sector is barely vestigial.

This failure to turn scientific excellence, or as Mr Huang said, the “AI ecosystem”, into viable, scaled, commercial and investible entities is entirely the product of something I have written in Woodford Views before.

For years, the UK’s long-only funds have systematically withdrawn from UK equities.

In short, the decision by scaled, long only, equity funds (defined benefit pension funds and other large-scale institutional funds) to eradicate almost all of their UK equity exposure over the last twenty years resulted in a chronic shortage of risk capital in the UK.

This vital ingredient required to turn all great science into scaled commercial success, upon which every highly successful US tech company once relied, has been denied to emerging UK science and technology companies and still is.  

This structural and crucial failure will be arduous to correct, and in the meantime, has inflicted much damage on the UK economy. Perhaps most unforgivable is that the billions of pounds that the UK taxpayer invests in higher education and the tax benefits provided to the beneficiaries of defined benefit pension schemes accrue minimal benefit to the economy.

Hardly any scaled tech businesses are created that employ people here, provide high-quality knowledge economy jobs, and pay taxes. The very same UK pension funds that have eradicated virtually all traces of UK equity risk from their investment portfolios appear quite happy to own international equity risk, and most galling of all, the tech businesses that have been created from pioneering UK research have all too frequently been acquired by US entities and commercialised there.

The response?

Relatedly and without wishing to sound too cynical, I noted the PM’s statement which preceded Mr Huang’s speech in which he announced a “huge increase in the size and power of Britain’s AI engine with an extra £1bn in funding to scale up the UK’s compute power by a factor of 20.”

This statement like so many others from politicians is probably not accurate but if it is, only goes to highlight the ludicrously small scale of the UK’s existing “compute power” and the tiny scale of the investment envisaged by Mr Starmer in the context, for example, of Meta’s commitment to invest between $60 and $65bn in US AI infrastructure and related projects in 2025 alone, or the astonishing combined total AI investment envisaged by the Mag7 in 2025 which is estimated to be $320bn.

And then there’s energy.

Finally, in the context of the future of AI and the data industrial revolution, I noted that in Bloomberg’s report of the conference, its journalist notes, rightly, that the type of AI models powering ChatGPT and other AI tools require a tremendous amount of compute capacity from massive data centres which in turn require abundant electricity and other infrastructure.

As I read this I was wondering if Mr Starmer might have had a chat with his colleague Mr Miliband, the Secretary of State for Climate Change and Net Zero, who appears to believe that it’s OK for UK industrial electricity prices to be 4x higher than those in the US, twice those in Italy, 2.5x those in France and 72% higher than in Germany.

If I were party to a chat with these two, I would like to pose the obvious question, which is how Mr Starmer’s ambitions for the UK’s AI industry, “we can be an AI maker not an AI taker,” is at all compatible with the highest industrial electricity prices in the world by some margin. I contend that it is not.

The bottom line?

So, I am left with mixed emotions having read Mr Huang’s comments. We should all reflect on the UK’s ability, against all the odds, to continue to lead the world in many areas of science and technology, and even in AI, the new industrial revolution.

But we should also recognise that the economy has failed, for clearly identifiable reasons, to convert that lead into financial and economic gain for the economy at large. That catastrophic failure must first be diagnosed, and corrective action put in place.

Some encouraging signs are emerging on this front, not least Rachael Reeves’ desire to persuade (and maybe even mandate) pension and other long-only institutional asset pools to invest in the UK. I would welcome this.

Secondly, it is surely time that the clear economic implications of the new government’s energy policy were addressed honestly. Judged only by Mr Starmer’s latest comments about Britain’s AI future, he appears to have called time on Mr Miliband’s energy strategy. More realistically, like so many politicians, he is once again talking out of the side of his mouth.