The US government banned the sale of AI chips like NVIDIA’s H100 to China in 2022 to prevent Chinese tech companies from using advanced AI for military or surveillance. However, Chinese businesses have been exploiting various loopholes to get around this ban.
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In a surprising revelation, Oracle is allegedly renting out Nvidia’s advanced AI chips to ByteDance, the owner of TikTok, despite a US ban on selling these chips to China. This practice highlights a significant loophole in the current regulations aimed at preventing advanced AI technology from falling into Chinese hands.
The US government banned the sale of advanced AI chips, such as Nvidia’s H100, to China in 2022. This move is part of a broader effort to prevent China from using advanced AI for military or surveillance purposes and to maintain a technological edge.
However, The Information reported that Oracle is circumventing these restrictions by renting out servers equipped with Nvidia’s chips to ByteDance within the US. While the chips are not being exported directly to China, this arrangement still allows ByteDance to leverage US-based AI capabilities.
ByteDance, suspected by many US lawmakers of having ties to the Chinese government, is reportedly utilizing Nvidia’s H100 chips rented from Oracle to train AI models on US soil. This arrangement is technically within legal bounds since the chips are not leaving the country. However, the spirit of the regulation, aimed at restricting China’s access to advanced AI technology, is clearly being undermined.
ByteDance’s Project Texas initiative aims to address US security concerns by claiming to isolate TikTok’s US operations from its Chinese headquarters. However, former ByteDance employees have described this initiative as largely superficial, suggesting that significant interactions still occur between the US and Beijing-based teams.
Other Chinese tech giants like Alibaba and Tencent are reportedly considering similar arrangements to access Nvidia’s chips. These companies might find it even easier to exploit these loopholes since they own US-based data centres, eliminating the need to rent from American firms.
Not all US companies are willing to engage in such practices. Two smaller American cloud providers reportedly declined ByteDance’s offers to rent Nvidia’s H100 chip-equipped servers, citing concerns about violating the spirit of US chip restrictions.
The US Commerce Department is aware of these practices and proposed a rule earlier this year to address the issue. This rule would require US cloud providers to verify the identities of foreign customers and report if they are training AI models potentially used for malicious purposes. However, many cloud providers opposed this proposal, arguing that the additional requirements would be burdensome. As a result, the proposed rule is currently in limbo.
Even if the US manages to close this particular loophole, it may not prevent Chinese cloud providers like Tencent and Alibaba from purchasing Nvidia’s chips and using them in their US-based data centres. This presents an ongoing challenge for US regulators who must balance business interests with national security concerns.
