The U.S. is drastically underprepared for the age of artificial intelligence, according to a group of experts chaired by former Google CEO Eric Schmidt.

The National Security Commission on AI warned in a 756-page report on Monday that China could soon replace the U.S. as the world's "AI superpower" and said there are serious military implications to consider.

"America is not prepared to defend or compete in the AI era," wrote Schmidt and vice chair Bob Work, who was previously deputy U.S. secretary of Defense. "This is the tough reality we must face."

The commission began its review in March 2019, and this is its final report for the president and Congress. The 15 members of the commission include technologists, national security professionals, business executives and academic leaders. Among them are Amazon's next CEO, Andy Jassy, Oracle CEO Safra Catz, Microsoft Chief Scientific Officer Eric Horvitz and Google Cloud AI chief Andrew Moore.

Schmidt and Work said the report presents a "strategy to defend against AI threats, responsibly employ AI for national security, and win the broader technology competition for the sake of our prosperity, security, and welfare."

A.I. to move beyond sci-fi

They warn that AI systems will be used in the "pursuit of power" and that "AI will not stay in the domain of superpowers or the realm of science fiction."

The report urges President Joe Biden to reject calls for a global ban on highly controversial AI-powered autonomous weapons, saying that China and Russia are unlikely to keep to any treaty they sign.

"We will not be able to defend against AI-enabled threats without ubiquitous AI capabilities and new warfighting paradigms," Schmidt and Work wrote.

Thousands of AI researchers and computer scientists signed an open letter that was published in 2015 and calls for a ban on offensive autonomous weapons.

"AI technology has reached a point where the deployment of such systems is — practically if not legally — feasible within years, not decades, and the stakes are high: autonomous weapons have been described as the third revolution in warfare, after gunpowder and nuclear arms," reads the letter, which was also signed by Tesla CEO Elon Musk, Apple co-founder Steve Wozniak, Twitter CEO Jack Dorsey and the late scientist Stephen Hawking.

Toby Walsh, a professor of AI at the University of Sydney, told CNBC the dangers have only "become nearer and more serious" since the letter was published. "Autonomous weapons must be regulated," he said.

The Future of Life Institute, a non-profit research institute in Boston, Massachusetts, said last month there are many positive military applications for AI but "delegating life and death decisions to autonomous weapon systems is not one of them."

The institute pointed out that autonomous drones could be used for reconnaissance missions to avoid putting troops in danger, while AI could also be used to power defensive anti-missile guns which detect, target, and destroy incoming threats without a human command. "Neither application involves a machine selecting and attacking humans without an operator's green light," it said.

Machine learning engineer Michael Lavelle told CNBC that there needs to be an international ban on AI decision making weaponry, similar to the convention on chemical weapons.

Samim Winiger, an AI researcher in Berlin, sees things differently, telling CNBC that AI weapons and killer robots will make today's weapons even more deadly.

"[Adopting AI weapons] is brutal insanity and everyone knows it, yet think tank staffers from DC to Beijing keep assuring us it's 'progress and necessary.'"

He added: "A real discussion around 'how AI can help to promote peace globally' is what is truly required — but you certainly won't find it on the agenda of Pentagon operatives or intelligence agency billionaires like the Eric Schmidts of the world."

China has stated that it wants to be a global leader in AI by 2030. The report's authors have said it is vital that the U.S. does all it can to eliminate the chance of this happening.

"We must win the AI competition that is intensifying strategic competition with China," said Schmidt and Work. "China's plans, resources, and progress should concern all Americans. We take seriously China's ambition to surpass the United States as the world's AI leader within a decade."

They added that China's domestic use of AI is "a chilling precedent for anyone around the world who cherishes individual liberty."

A.I. proposals

The commission calls on the U.S. government to more than double its AI research and development spending to $32 billion a year by 2026.

It also suggests establishing a new body to help the president guide the U.S.' wider AI policies, relaxing immigration laws for talented AI experts, creating a new university to train digitally skilled civil servants, and accelerating the adoption of new technologies by U.S. intelligence agencies.

The report also warns that the U.S. needs to do more to become self-reliant on computer chips and warns about the dangers of being so dependent on Taiwan's TSMC.

"Microelectronics power all AI, and the United States no longer manufactures the world's most sophisticated chips," wrote Schmidt and Work. "Given that the vast majority of cutting-edge chips are produced at a single plant separated by just 110 miles of water from our principal strategic competitor, we must reevaluate the meaning of supply chain resilience and security."