Israel has put forward fostering artificial intelligence (AI) as a national survival strategy to solve the problem of security expense increases leading to economic slowdown. The idea is that to break the vicious cycle in which defense expenditure surges due to frequent wars and dampens economic growth, Israel must secure advanced competitiveness in AI, a field seen as a new growth industry.
On the 10th (local time) at AI Week 2025 held at Tel Aviv University in Israel, key government officials pointed to AI as the key to resolving the dilemma between national security and the economy. AI Week is Israel's largest technology conference, where AI experts and figures from politics and business around the world gather in Tel Aviv each year to share the latest technology trends and national strategies.
◇ "AI is the only solution to break the chain where security expense leads to economic crisis"
In a keynote speech that day, Nir Yanovski Dagan, head of the Data and AI Innovation Division at the Israel National Digital Agency (INDA), pointed out Israel's chronic problem in which surging security expense directly leads to an economic crisis, stressing that "the country's future will depend on how it responds to the AI revolution."
Dagan said, "Israel's fundamental crisis is that the structure in which the economy is shaken by the burden of security expense every time war breaks out has not changed to this day," adding, "To expand the economy enough to absorb defense expenditure and more, a powerful growth engine like AI is essential."
The Nagel Committee, an advisory body to the Israeli government, concluded that a total investment of 25 billion shekels (about 11 trillion won) will be needed over the next five years to build an AI ecosystem. The committee explained that to shift the structure of the national economy to be AI-centric, large-scale funds must be injected into expanding data and computing infrastructure, developing large language models (LLMs) based on Hebrew and Arabic, and introducing AI in the public institutional sector.
New investment in the private institutional sector is also flowing into AI. According to Blumberg Capital, 45% of Israeli venture investment over the past five years has been concentrated in AI. This ranks first in the world in terms of investment share. Yodfat Harel Buchris, a director at Blumberg Capital, said, "With private capital already focused on AI, if large-scale fiscal investment by the government serves as a primer, the pace of growth will accelerate further."
◇ Launching all-around improvements in infrastructure, talent supply, and deregulation
The Israeli government is focusing on strengthening hardware infrastructure, which has long been considered less competitive than software. Israel lacked its own computing resources to train AI models and had to rely on overseas cloud and supercomputer resources.
Dror Bin, CEO of the Israel Innovation Authority (IIA), said, "Recently, Israel's first AI supercomputer, 'The Cloud of the New Era,' officially went into operation," adding, "Demand surged so much that reservations were fully booked upon opening, and we are discussing additional expansion."
Fixing the imbalance in talent supply is also cited as a task. CEO Bin assessed, "According to an Innovation Authority survey, Israel's ecosystem is currently short 1,500 high-level AI experts." The experts industry wants are master's and Ph.D.-level personnel who take more than 10 years to develop, but academia produces only 300 to 400 people a year, failing to catch up with demand.
As a solution, the Israel Innovation Authority has brought out the "retraining" card. It has introduced an intensive training program to convert existing scientists in basic sciences such as physics and biology into AI experts. The strategy is to transplant into AI the successful model that made Israel a cybersecurity powerhouse by nurturing talent starting in high school. CEO Bin said, "We will resolve the labor shortage by expanding retraining programs and concurrently attracting overseas talent."
◇ Supporting AI innovation by introducing a regulatory sandbox in the public institutional sector
The Israeli government also plans to lower regulatory barriers that hinder AI growth. Dagan said, "By proactively easing drone regulations in the past and conducting demonstrations, Israel was able to become a leading country in the drone field," adding, "We will apply this model to AI."
Currently, the Ministry of Education is piloting AI learning tools in schools, and the Ministry of Health is operating a sandbox that opens hospital systems to verify AI technologies. Led by the government, the structure turns public systems into a massive test bed, while providing startups with an initial validation market.
On this basis, Israel has set a goal of leaping into the "world's top five AI leaders" by making AI technological prowess the core of national competitiveness. Dagan said, "Plans for AI investment and ecosystem building will serve as a chance to secure a foundation for sustained growth amid the 'double burden' of security instability and economic slowdown."