Big tech is delighted to rent American chips to Chinese companies banned from buying them

Chinese firms can access Nvidia chips by renting servers in other countries

7/18/24 1:19PM

One of the defining geopolitical struggles of the last few years has been America’s attempts to limit Chinese access to advanced artificial intelligence chips through export bans. China is America’s biggest rival, the world is in an AI arms race, and America doesn’t want China to take the lead.

For private companies that produce AI chips, however, China doesn’t represent a geopolitical enemy. It represents a customer base. Despite current export bans on chip sales to China, American companies have still found ways to sell “access” to Nvidia’s AI chips to Chinese companies. From The Information:

Both Google Cloud and Microsoft Azure are offering to rent Nvidia’s AI chips to Chinese companies, including AI startups, for use in data centers outside China. But apart from the biggest U.S. tech giants, there is a whole sector of smaller cloud providers specializing in offering access to Nvidia-powered servers around the world, and their services are available to Chinese customers. Some of these cloud providers are based in the U.S., but numerous others are based in Europe and Asia.
Last summer, for example, Google Cloud’s Asia Pacific team contacted a prominent Chinese startup that develops large-language models and offered to rent servers in Europe with Nvidia’s A100 and H100 chips, according to a person with direct knowledge of the talks. U.S. rules block the export of both kinds of chips to China. The approach didn’t lead to a deal.
Microsoft also offers its Nvidia-chip server rental services, including servers with A100 and H100 chips, to Chinese customers through data centers outside China, according to a Microsoft employee with knowledge of the services and a person directly involved in the sales.

In 2019 and 2020, the United States added Huawei and SMIC to a restricted entities list to limit their ability to design chips that rivaled those produced by western companies like Nvidia. This decision was manufacturing-based: the US government didn’t want China to leverage western technology to create its own powerful chips that could be used by its military.

However, since the generative AI boom kicked off with the launch of OpenAI’s ChatGPT in November 2022, the export ban became more complicated. Training a large language model requires a tremendous amount of computing power, and Nvidia’s chips are widely seen as the most powerful on the market. While US export bans still hinder Chinese manufacturers’ abilities to improve their own chips, Chinese tech companies looking to train their own LLMs don’t need physical possession of Nvidia chips. They just need access to servers with Nvidia chips, regardless of where those servers are located.

US Commerce Secretary Gina Raimondo has noted that the US needs to block this practice to prevent China from “training their frontier models,” but for now, the secondary cloud rental market is wide open.

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Tesla and Google’s Waymo to Senate committee: Fix self-driving laws or China will win

Ahead of their appearances Wednesday at a Senate committee hearing on the future of self-driving, the two biggest names in the sector, Tesla and Google’s Waymo, are talking the same book.

Both companies are warning lawmakers that without a federal framework for autonomous vehicles — something Congress has debated for years and is now considering again as part of broader transportation legislation — China will seize the lead.

“The United States is locked in a global race with Chinese AV companies for the future of autonomous driving, a trillion-dollar industry comparable in strategic importance to flight and space travel,” Waymo Chief Safety Officer Mauricio Peña said in written remarks ahead of the event. “In the absence of US leadership on a national AV legislative framework, Chinese AV competitors will fill the gap and set the safety and technical standards for the rest of the world.”

Tesla Vice President of Vehicle Engineering Lars Moravy, for his part, wrote, “If the US does not lead in AV development, other nations — particularly China — will shape the technology, standards, and global market.” He added, “China will be the dominant manufacturer of transportation for the 21st century.”

The two companies face steep competition from Chinese firms, including Baidu, which operates a robotaxi service, and BYD, whose EVs offer driver assistance technology similar to Tesla’s Full Self-Driving and which has been outselling the US automaker.

Hit the Road, Mac: The Future of Self-Driving Cars

$126B

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Waymo is now worth $126 billion, after raising $16 billion in a funding round led by its parent company, Google. With this capital, Waymo plans to expand its robotaxi service to more than 20 new cities, including international markets.

On Wednesday, Waymo’s chief safety officer will testify at a Senate Committee on Commerce, Science, and Transportation hearing, alongside a representative for Tesla, urging lawmakers to create a national regulatory framework for autonomous vehicles.

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Dan Ives thinks Tesla will someday merge with SpaceX, too

Wedbush Securities analyst Dan Ives is just like us: he thinks that Elon Musk’s Tesla and SpaceX could someday become one company.

In a note this morning, Ives argued there’s a “growing chance” Tesla will eventually merge in some form with newly merged SpaceX and xAI, as Musk builds what he sees as a single, sprawling AI ecosystem spanning both space and Earth.

Over time, Ives wrote, he thinks Musk will look to “combine forces/technologies,” with the long-term goal of owning and controlling more of the AI stack. Ives thinks Musk could achieve that “holy grail” over the next year and a half.

Earlier today, we pointed out the myriad similarities between Tesla and SpaceX — shared impossible missions, common methods for achieving those goals, and a physics-first, economics-later ethos — as well as Musk’s long-standing penchant for knitting his companies together in the first place.