Tech and the state: An entanglement

2025 is the year technology became the geopolitical focus

Technology companies are no longer just commercial players. In 2025, tech giants are deeply entangled in geopolitics, whether they like it or not.

That reality was on full display at the start of the year, when the 2025 US presidential inauguration placed the heads of some of the world's biggest technology companies front and centre.

Jeff Bezos, Elon Musk, Mark Zuckerberg, Sundar Pichai, Tim Cook and TikTok chief Shou Zi Chew were not sitting quietly in the background. They were visibly part of the political moment.

The message was unmistakable: Technology has moved into the core of American state power.

Tech’s influence on politics and diplomacy

That shift helps explain why US politicians such as vice-president JD Vance now weigh in when the European Union fines or investigates companies like Meta or X.

These cases are formally and nominally about competition, safety and content moderation under laws such as the Digital Services Act and Digital Markets Act.

Yet Vance reframes them as attacks on American companies and by extension, American interests. He links EU regulation to free speech debates at home and treats regulatory action as a trade and foreign policy issue rather than consumer protection.

Social media access

A similar dynamic is now playing out over social media access for young people. Australia recently passed legislation banning social media for children under 16, making it one of the first countries to impose such sweeping restrictions. The move is driven by growing concern over mental health, online harms and addictive platform design.

New Zealand is watching closely. There is local political pressure to follow Australia's lead, with concerns about youth mental health and digital wellbeing resonating strongly here. Any decision to impose a ban will immediately become another geopolitical issue, not just a domestic policy choice.

The United States opposes age-based social media bans. American tech companies view such restrictions as barriers to market access and threats to their business models. More importantly, US officials increasingly frame these debates as matters of free speech and national interest, treating restrictions on platforms like Meta, TikTok or YouTube as attacks on American commercial power.

If New Zealand were to ban social media for under-16s, it would likely face pressure from Washington, just as the EU has over its regulatory approach.

The question is no longer simply whether such a ban is good policy. It is whether New Zealand is willing to absorb the diplomatic and economic friction that might follow. Technology policy has become foreign policy. Today, even decisions made in the name of child safety now carry geopolitical weight.

When private companies control infrastructure

This is not tech companies driving foreign policy outright - although there are possible examples of exactly that, but it is politics recognising that digital platforms now shape economic power, public debate and national influence.

One example of tech playing a direct foreign policy role is Elon Musk and Starlink’s involvement in Ukraine.

Musk refused Ukraine's request to activate Starlink over Crimea to prevent an attack on Russia's Black Sea fleet, saying SpaceX would be "explicitly complicit in a major act of war"

Later, he ordered the deactivation of Starlink coverage during Ukraine's Kherson counteroffensive in fall 2022, causing front-line units to lose connectivity and disrupting the operation.

From market forces to state power

Charles Edel from the Center for Strategic and International Studies argues tech’s newfound geopolitical role is part of a much bigger shift. Speaking in Auckland at the CIO summit, Edel described the end of the relatively stable post-Cold War era and the return of great power competition.

In today’s world, geopolitics and economics are no longer separate. Governments now see technology as strategic infrastructure, not just a market outcome.

That is why states are intervening more aggressively. Export controls on advanced chips, restrictions on foreign investment, sanctions, tariffs and industrial policy are all being used to steer technological development. Edel's blunt assessment is that politics now trumps economics. Efficiency matters less than resilience.

Cybersecurity is a battleground

Cybersecurity shows how far this has gone. NATO's chief information officer, Manfred Boudreaux-Dehmer, was also at the CIO summit where he described cyberspace as “permanently contested”.

Russia, China, Iran and North Korea are all using cyber operations as tools of state power. Attacks are not just about theft or disruption. They are integrated with military strategy, political pressure and economic coercion. New Zealand has experienced this directly—the National Cyber Security Centre disrupted an attack on a major telecommunications provider that could have affected a significant portion of the mobile market.

The threat extends beyond digital attacks. Suspected sabotage of submarine cables in the Baltic Sea and Taiwan represents a new form of hybrid warfare targeting physical infrastructure. New Zealand depends on just three cable networks connecting us to the world—a vulnerability that becomes critical if multiple links are severed.

NATO's response is telling. It is moving away from centralised systems towards distributed, cloud-based architectures, using artificial intelligence to detect threats and treating private sector technology providers as essential partners. Innovation happens first in industry, not government, but governments are no longer willing to leave outcomes to the market.

The conclusion is clear: Technology firms are now part of the geopolitical landscape. Governments are pushing back, pulling them closer, and sometimes using them as instruments of power. For businesses and policymakers alike, this is no longer a future risk. It is where we are in 2025.

Artificial intelligence

It feels strange to get this far through a wrap of the year's main technology issues without mentioning AI. The technology has dominated the conversation.

Artificial intelligence is now the sharp edge of global power politics.

What began as a race to build better chatbots has become a strategic contest between states, led overwhelmingly by the United States and China. Europe and other nations are a long way behind.

The US-China AI race

US companies like OpenAI, Google, Microsoft and Amazon dominate the most advanced AI models and the cloud infrastructure that runs them. China's tech sector, backed heavily by the state, is pushing hard to catch up, with AI embedded across logistics, surveillance, manufacturing and defence.

China's DeepSeek chatbot shocked markets in January, demonstrating competitive AI capability built at a fraction of US development costs and despite American chip export controls.

Open source AI models offer an alternative, at a lower cost than the US approach. It remains to be seen if their long term impact will be significant.

Washington now treats AI leadership as a national security issue. That's why the US has imposed export controls on advanced chips and chip-making equipment, explicitly to slow China's progress. These moves aren't about markets. They're about power. US firms lose access to parts of the Chinese market, but in return gain protection from future strategic competitors.

Staggering investment levels

The scale of investment backing this competition is staggering, and it brings serious financial risk.

America’s big four tech companies are collectively investing close to $400 billion in AI infrastructure in 2025 alone. For perspective that is more than seven times New Zealand's entire government operating budget.

If the AI market crashes, the consequences will be far more severe than the dotcom bust 25 years ago. The sums involved are vastly larger.

AI investment now runs into hundreds of billions of dollars, concentrated in a handful of companies that are also among the world's most valuable. Microsoft, Google, Amazon and Meta are all betting enormous amounts of capital on AI infrastructure and development.

The risk extends well beyond the technology sector. These companies are now central to pension funds, index funds and retirement savings globally.

The financial risk of AI dominance

A sharp correction in AI valuations would ripple through financial markets, affecting institutional investors and ordinary savers alike. Banks have lent heavily to fund data centre construction and chip manufacturing.

Energy companies are signing long-term contracts to power AI infrastructure. Real estate markets in certain regions are shaped by demand for AI-related facilities.

The dotcom crash was painful but contained. An AI crash would be systemic. The difference is not just scale but integration. AI has been woven into the fabric of the broader economy in ways the early internet never was. If confidence breaks, the damage will be widespread and the recovery slow.

The rest of the world looks on

Other countries are present, but on the margins. Europe is strong on regulation and ethics, but depends heavily on US technology. The UK and Israel have research and defence strengths, but not global platforms. India has talent, but not the infrastructure. The result is effectively an AI duopoly, with the rest of the world orbiting around it.

For New Zealand, this creates uncomfortable dependencies. Almost all advanced AI used in New Zealand runs on US cloud services: Amazon, Microsoft and Google dominate. This creates a dependency on infrastructure subject to American law and policy decisions, even when the data is physically stored here.

This arrangement brings capability and scale, but it also means exposure to decisions made in Washington — on regulation, export controls or sanctions — with little local influence. It raises questions about resilience, sovereignty and long-term access.

Quantum computing: The next strategic frontier 

This leads directly into quantum computing, the next frontier already being framed in geopolitical terms. Quantum machines promise enormous gains, but they also threaten to break today's encryption, undermining secure communications, banking and government systems. The US and China are again in the lead. Governments are already planning for the moment quantum becomes operational, often referred to as "Q Day".

Quantum computing is massively overhyped. It has yet to deliver much of substance despite the noise and the vast sums invested. Yet, if those investments pay off, the technology could be as pivotal as AI.

The pattern is familiar. Innovation begins in the private sector. Governments step in when the strategic risks become clear. Efficiency gives way to resilience. Markets give way to policy.

For countries like New Zealand, the challenge is not to compete head-to-head, but to understand where the dependencies lie, where resilience is needed, and how to stay plugged into a system increasingly shaped by geopolitics as much as technology.

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Satellite networks and the coverage gap

Satellite communications offer a glimpse of how these dependencies might evolve closer to home.

New Zealand's fibre network reaches 87 percent of the population. Roughly 40% of New Zealand's land area remains outside traditional mobile coverage. Coverage is patchy in remote areas and some rural districts.

Fibre remains the gold standard for connectivity, and there is broad agreement that extending it further would deliver real economic and social benefits. But there is little government money available to do so.

Into that gap, satellite technology is emerging as a practical alternative. One NZ has already integrated satellite text messaging into its mobile network and is working to expand that capability to include voice and data. The promise is coverage in areas where building traditional infrastructure makes little economic sense.

Satellite connectivity is not just a domestic infrastructure question. Like other technologies, it is also deeply geopolitical. The companies building these constellations are mostly American. SpaceX's Starlink dominates, but Amazon's Project Kuiper and AST SpaceMobile are now entering the market. AST SpaceMobile recently signed a deal with 2degrees to provide satellite connectivity directly to standard mobile phones.

This creates a new form of dependency. New Zealand gains coverage and capability, but relies on foreign-owned technologies operating under US regulation and potentially subject to US foreign policy decisions. If satellite becomes critical infrastructure, the strategic implications multiply.

Sovereignty

Fibre and land-based wireless technologies give us a degree of communications sovereignty. It would make sense to give all New Zealanders the option of sovereign communications.

Local technology leaders have been warning about these dependencies for years—concerns about what Don Christie called "digital colonialism" in 2021 have only intensified as geopolitical tensions have risen.

The same dynamic seen in AI and quantum computing is repeating itself in space. Innovation happens in the private sector. Strategic risks become visible later. And by the time governments respond, the dependencies are already locked in.

In the worst case, New Zealand’s satellite connections could be switched off in an instant by someone operating in an entirely different culture, working in a distant land. There have already been instances and threats of this happening elsewhere.

Around the time Russia invaded Ukraine, a cyberattack disabled connections to the US-owned Viasat Inc's KA-SAT satellite network, affecting users across Europe.

Threat from space

NZ Space minister Judith Collins has warned that foreign forces have the ability to use satellite infrastructure to "harm our national security. The New Zealand Security Intelligence Service (NZSIS) has reported that foreign actors have attempted to set up civilian-labelled space infrastructure that concealed ties to foreign militaries.

The Outer Space and High-altitude Activities Amendment Bill, passed in 2025. It was introduced specifically to regulate and deter foreign interference in ground-based space infrastructure.

We are presented with a series of difficult and overlapping challenges. There's a potential bright future, but getting there is far from trivial. It's going to need the kind of digital leadership that industry groups like Tuanz say is currently missing.

For New Zealand, the pattern is consistent: connectivity, computing power and digital infrastructure increasingly come from a small number of foreign providers. The challenge is not to resist that reality, but to manage it with clear-eyed attention to resilience, sovereignty and the geopolitical forces now shaping technology itself.