Unlock the White House Watch newsletter for free
Your guide to what the 2024 US election means for Washington and the world
Microsoft has warned Donald Trump’s administration it risks making a “strategic mis-step” if it pushes ahead with export controls on artificial intelligence chips, which will push allies to use Chinese technology instead.
Brad Smith, Microsoft’s president, on Thursday said the US president should not go ahead with export controls on chips that are used to train and run AI models because they would adversely impact allies such as Israel, India and Singapore.
He said strictures, announced in the final days of Joe Biden’s administration and intended to come into force in May, would cause dozens of countries facing caps on American AI chips to buy from China.
“As drafted, the rule undermines two Trump administration priorities: strengthening the US AI leadership and reducing the nation’s near trillion-dollar trade deficit,” Smith wrote in a blog post titled “The Trump administration can avoid a strategic mis-step in the AI global race.”
He added: “Left unchanged, the Biden rule will give China a strategic advantage.”
The Trump administration’s “America first” agenda, which includes the threat of tariffs on trading partners, poses a significant risk to the US tech sector, which relies heavily on chip manufacturing in Taiwan.
Smith, an influential voice in Washington, has struck a conciliatory tone with the new administration and last month he and chief executive Satya Nadella met Trump at his Mar-a-Lago resort.
The “AI diffusion” export controls, introduced in the last days of Biden’s presidency, create a three-tier licensing system for AI chips used in data centres, such as Nvidia’s powerful graphics processing units.
They are aimed at making it harder for Chinese companies to circumvent US export controls by accessing them via third countries.
The legislation imposes a cap on chip export volumes for all but a small number of countries, which include G7 members and Taiwan. More than 100 countries fall into this “middle” tier.
The EU, Nvidia and the wider chip industry have criticised the rules, which are now in an industry feedback period.
The rule, Smith said, “goes beyond what’s needed” by putting “quantitative limits on the ability of American tech companies to build and expand AI data centres in their countries”, presenting “a gift to China’s rapidly expanding AI sector”.
Huawei, for example, has been rolling out its latest Ascend 910C processors, with the Chinese government urging local companies to shift away from Nvidia’s chips. Nvidia sells less powerful versions of its popular AI chips in China, in compliance with export controls.
Microsoft has pledged to spend about $80bn on capital expenditure this year. It also outspent rival hyperscalers acquiring chips and graphics processing units in 2024, laying out about $20bn compared with Google’s $14bn and Amazon’s $8bn, according to New Street Research.
On Wednesday, Nvidia’s chief financial officer Colette Kress told the Financial Times the company was engaging with the Trump administration but it was “not exactly sure what the administration will do” in relation to the AI diffusion rule.
