Microsoft warns Trump: Where the US won't sell AI tech, China will

Microsoft would like the Trump administration to row back AI export restrictions introduced by his predecessor that affect countries where the cloud services giant has datacenters.

In a blog post on the company's website, president and vice chair Brad Smith claimed that regulations brought in just before the end of the previous administration risk undermining America's ability to succeed in the emerging global AI economy.

"The Biden administration's interim final AI Diffusion Rule caps the export of essential American AI components to many fast-growing and strategically vital markets. As drafted, the rule undermines two Trump administration priorities: strengthening US AI leadership and reducing the nation's near trillion-dollar trade deficit," Smith wrote.

Left unchanged, the rule would give China a strategic advantage in spreading its own AI technology over time, he warned.

The rule, understood to take effect 120 days from its publication in January, establishes caps on the volume of AI-focused chips that can be sold to most countries, as well as measures intended to restrict the transfer of weights for advanced AI models to non-trusted countries.

It also affects nations based on the Biden administration's assessment of their trustworthiness, with a select group including Japan, UK, South Korea, and the Netherlands effectively exempt, while Singapore, Israel, Saudi Arabia, and the United Arab Emirates face caps. States such as Russia, China, and Iran are blocked completely.

Microsoft takes issue with these measures because the caps affect countries where it operates datacenters, potentially limiting the availability of GPUs and other infrastructure.

"The Biden rule goes beyond what's needed," Smith said. "It puts many important US allies and partners in a Tier Two category and imposes quantitative limits on the ability of American tech companies to build and expand AI datacenters in their countries."

Smith added: "This includes many American friends, such as Switzerland, Poland, Greece, Singapore, India, Indonesia, Israel, the UAE, and Saudi Arabia. These are countries where we and many other American companies have significant datacenter operations."

So, the restrictions are bad, not because they might be unfair or insulting to the countries concerned, but because they might affect the ability of Microsoft and American companies to do business. OK, Brad.

• US senator wants to slap prison term, $1M fine on anyone aiding Chinese AI with ... downloads?
• ASML makes hay while suns shines, but Trump could rain on its parade
• China to probe US chip subsidies as export curbs rattle allies
• Nvidia snaps back at Biden's 'innovation-killing' AI chip export restrictions

This Tier Two status undermines customer confidence in Microsoft's ability to provide the AI computing capacity they need, he asserted, potentially driving affected countries to seek AI infrastructure and services elsewhere.

"And it's obvious where they will be forced to turn. If left unchanged, the Diffusion Rule will become a gift to China's rapidly expanding AI sector," Smith claimed.

Microsoft isn't the only US tech giant pushing back against these rules. In an interview with Bloomberg, Amazon chief Andy Jassy said: "I don't know how this administration feels about it, but I would say that we share the concern that it has limitations on certain countries who are natural allies of the US."

"They're going to need more chips, and so I think if we don't do it, we're going to basically give up that business and those relationships to other countries, who can provide those chips," he added.

GPU megacorp Nvidia also criticized the legislation when it was announced, saying that the new rule "threatens to squander America's hard-won technological advantage."

"Rather than mitigate any threat, the new Biden rules would only weaken America's global competitiveness, undermining the innovation that has kept the US ahead," VP of government affairs Ned Finkle said at the time.

We asked the US Department of Commerce whether it plans to revisit the AI Diffusion Rule and are awaiting a response. ®