TOKYO -- As the U.S. and China race for technological supremacy and AI dominance, universities face the challenge of keeping pace with the advancements, staying relevant and, increasingly, managing ever-growing security compliance requirements.

Daniel Diermeier, chancellor of Vanderbilt University in the southern U.S. state of Tennessee since 2020, is confident that higher educational institutions are up to the task. "Historically, universities have been able to metabolize innovation, to incorporate [the changes] into what they are doing, rather than being disrupted," Diermeier told Nikkei Asia during a recent visit to Japan.

From the printing press to television, computers and the internet, virtual reality or now AI, universities have long been challenged by technological shifts, said the German-born political scientist. Still, he said AI could have a "much bigger impact on society" than previous disruptions, requiring vigilance.

For schools in liberal democracies, especially the U.S., excessive or improper use of AI by students is not the only consideration.

As the head of a renowned research university, Diermeier emphasized that "there's no doubt that international collaborations are super valuable and very important," when answering questions with regard to China.

"On the other hand," he said, "there is a real concern about national security, particularly on high-risk technology and dual-use technology." The federal government is "now more alert and active in this field," he said, comparing the question of security on American research campuses to matters like medical patient safety, lab safety and clinical trials. "All those things that are heavily regulated, we are just having the same thing on the national security side, as reflective of the changing national security landscape that we have all seen." This is adding to pressure on school finances.

In a dialogue at the University of Tokyo with Akira Igata, a project lecturer who leads the Economic Security Intelligence Lab at the university's Research Center Advanced Science and Technology, Diermeier surprised his audience when he revealed that Vanderbilt spends more than $300 million on compliance with various federal regulations out of an annual operating revenue of $2.02 billion for the year ended in June 2025. The latest annual revenue for the University of Tokyo disclosed last month was 299.7 billion yen ($1.9 billion).

Daniel Diermeier, chancellor of Vanderbilt University, speaks at an event at the University of Tokyo in mid-October.

"There's a whole question of foreign influence and conflict of interests" that require compliance, he told the audience at the university dialogue. "We take them seriously and we abide by them."

This leaves "very limited" room for collaborations with Chinese entities, he acknowledged. When pressed on whether there is any such cooperation, he said, "Practically no."

Asked what would happen if China surpasses the U.S. in AI development, Diermeier only said that it is "super complicated" and that "we are trying to figure out how we are going to think about these things."

Vanderbilt has made major investments in national security as a field of study, too, with Diermeier leading the creation of an Institute of National Security two years ago, "because we believe we are at a point where national security is more and more shaped by technology." The school invited retired U.S. Army four-star general and cyber defense expert Paul Nakasone to serve as the founding director.

Diermeier explained that the institute explores "the intersection between national security and technology." The goal, he said, is to help "policymakers to understand technology, and technologists to understand policies." The chancellor sees technology, particularly in the AI era, as both a challenge and an opportunity.

In terms of the university administration, he plans to "double down" on AI usage, predicting it will enable "a golden age of scientific discoveries across the board." He considers AI a must-use tool, at least in certain disciplines, in order for academia to stay relevant.

"If you can't use AI tools, you're no longer operating at the frontier," he said, although he added that disciplines such as creative writing should exclude its use.

As for preventing students from cheating with AI, Diermeier was unfazed. "I don't understand why people are so worried about that," he said, arguing that a "very simple solution" is to conduct oral exams after students submit papers.

A bigger challenge is to "make sure that students still obtain mastery of a particular field," even though AI could provide answers to various questions instantly. "The danger is, people will not do the hard work anymore," he told Nikkei Asia, as the technology's tools "will also be crutches for not doing the hard work. The tricky question will be, how do we make sure that they understand the tools and use the tools, but they also understand the domain."

He said universities are now in a "race between education and technology," citing the title of a 2008 book by Claudia Goldin, who won the Nobel economics price three years ago, and her husband Lawrence Katz. "Education needs to keep speed with technology, which is very challenging. That is something we must do." All of this comes as American universities are under heavy pressure from the administration of President Donald Trump, through cuts and freezes of federal funds triggered by claims over antisemitism on campuses and civil rights policies such as diversity, equity and inclusion (DEI) programs.

"There is a tremendous amount of political drama around the universities in the U.S.," the veteran educator said, lamenting a decline in trust surrounding higher education in recent years. When "you lose trust with the American public, you become an attractive target for politicians," he said. "That is not a good position for universities to be in."

Nonetheless, he is optimistic about the future of universities, even if they have to "do things differently." "What I don't really see is evidence that we are going to be irrelevant," he said.