East Asian Cities Threaten US AI Dominance, According to The Observer’s AI Cities Index

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The Observer has released its inaugural AI Cities Index: a first-of-its-kind report identifying which cities are leading the global AI race.

The new ranking has scored 57 cities across 36 countries based on levels of AI investment (assessing public, private and procedural investments in AI), innovation (capturing breakthroughs in technology that are indicative of greater capacity for AI in the future) and implementation (the availability of the institutions, systems and practitioners needed to put AI to work).

While most analysis of global AI development takes a national lens, this report goes deeper to understand which metropolitan hubs are truly driving the sector’s growth. The findings build on the Global AI Index which has been benchmarking AI impact at a national level for seven years.

TAKEAWAY 1: East Asian cities square up to US for AI crown

San Francisco and New York are named as the world’s leading cities for AI - taking the top two spots in the Index overall. San Francisco outranks other major cities for innovation, investment and its ability to successfully integrate AI innovations into society, with New York also receiving top scores across the board. However, the research shows that East Asian cities are snapping at America’s heels.

While US cities still dominate when it comes to attracting capital, East Asian hubs are outperforming some of their US counterparts when it comes to AI implementation, infrastructure and the strength of their operating environments. According to the ranking, 60% of the world’s leading AI cities are in East and Southeast Asia: Seoul, Tokyo, Singapore, Shanghai, Shenzhen and Beijing.

On innovation, it’s a straight fight between Chinese cities and US tech hubs: San Francisco tops the ranking, followed by Beijing in second, New York in third and Shenzhen in fourth place.

According to wider research, the performance gap between Chinese and American AI models has narrowed to just 2.7%, down from as much as 31.6% in 2023. This is despite the US producing more frontier models overall (50 in 2025, compared to China’s 30; although China’s count doubled year-on-year).

TAKEAWAY 2: Seoul emerges as AI powerhouse

Seoul emerges as a standout city outside the US when it comes to AI. The South Korean capital ranks first in the world for AI implementation: the Index's measure of how far a city has built the infrastructure, institutions and systems needed to put AI to work across business, government, education and communities.

The city has stood up the Seoul AI Innovation Committee to support SMEs that lack the budget to fund in-house AI expertise or infrastructure. And much of South Korea’s chip design and manufacturing is concentrated in the capital: Seoul is home to approximately 200 semiconductor headquarters, including world-leading chipmakers Samsung and SK Hynix, which both top $1tn in market capitalisation.

Tokyo ranks third and Singapore fifth in the implementation table, with Shanghai, Shenzhen and Beijing also featuring in the global top ten. While cities like Seoul, Singapore and Beijing have built the institutional infrastructure required to run AI through the public sector at scale, reports from San Francisco and New York point to adoption that remains pilot-scale and fragmented.

In contrast, cities known for their tech prowess and strong state-backing, including Tel Aviv, and Dubai, fail to rank in the top ten cities when it comes to AI implementation.

TAKEAWAY 3: East Asia beats US at rolling out AI initiatives

The Index also reveals a split in the nature of global AI leadership. While US cities in the ranking reflect an ecosystem built to produce breakthroughs and monetise speculative bets, East and Southeast Asian cities are taking existing AI capability and pushing it into government services, factories and small businesses. In the market, this is evidenced by state-led initiatives like Beijing’s national AI fund, Singapore’s National AI Strategy 2.0, Japan’s METI and Seoul’s Stargate initiative.

In East Asia, AI ecosystems also appear more distributed. China has three cities in the global top ten - Beijing, Shenzhen and Shanghai - compared to a US ecosystem hyperconcentrated in San Francisco.

Patricia Clarke, The Observer’s Technology Editor said:

“This is the first time anyone has mapped AI’s ever-expanding reach beyond the national level.

“Unsurprisingly, San Francisco defends its reputation as the capital of technology and innovation. But East Asia’s strength reflects the growing power of state-built and research-led ecosystems. Seoul’s thriving AI economy, in particular, is being built on sustained top-down investment in AI research, infrastructure and adoption.

“What this Index makes clear is that the map of AI power is no longer a map of countries. It’s redrawing itself around cities. Some of tomorrow’s most important AI decisions may not be made in Washington or Beijing, but in Seoul, Shenzhen and a handful of other emerging hubs.”

The full AI Cities Index is available via this link.

Notes to Editors

About The Observer

The Observer is the world‘s oldest Sunday newspaper, founded in 1791. Acquired by Tortoise Media in April 2025 from Guardian Media Group, it operates under editor-in-chief James Harding as an independent title combining its historic print heritage with Tortoise’s slow-journalism approach to news and analysis.

Methodology

The AI Cities Index is a composite Index built from 50 indicators drawn from quantitative sources and qualitative fieldwork, covering 57 cities worldwide. The Index design, methodology and indicator selection was devised by The Observer’s AI Index team with extensive consultation with experts, including an advisory panel of technical and subject matter experts.

The Index takes the same underlying conception of AI capacity as the Global AI Index, but offers a more granular view of AI capacity within countries. We define a city’s AI capacity as its demonstrated ability to originate, build, finance and absorb artificial intelligence.

It is intended to be iterated and improved annually.

The 50 indicators that comprise the AI Cities Index have been selected because they:

· Sizably relate and contribute to key developments in artificial intelligence
· Draw on readily publicly-available information
· Use up-to-date data sources

Our indicators are grouped by associative themes around three main pillars:

· Implementation: capturing the availability of institutions, systems and practitioners required to operationalise AI in business, government, education and communities. This pillar contains the sub-pillars of infrastructure and operating environment.
· Innovation: capturing breakthroughs in technology that are indicative of greater capacity for AI in the future. This pillar contains the sub-pillars of research, development and commercial ecosystem.
· Investment: Thematically reflecting financial and procedural investments in AI. This pillar is sub-divided into pillars of public and private investment.

The full methodology is available here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20261020755794/en/

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