US Targets Cloud Giants for Foreign AI Monitoring in China Tech Tussle

💬 STOCKS MENTIONED: $AMZN, $MSFT, $GOOGL

📝 SUMMARY: The Biden administration is escalating its technological rivalry with Beijing by proposing a new regulation that would compel major US cloud services providers, including Amazon.com Inc. ($AMZN) , Microsoft Corp. ($MSFT) , and Alphabet Inc.’s Google ($GOOGL), to reveal the identities and activities of foreign clients, particularly those from China, who are developing artificial intelligence applications. The draft rule, set for release on Monday, mandates these companies to collect and report details like names and IP addresses of foreign customers, alongside any suspicious activities.

This proposed regulation, which mirrors the strict "know-your-customer" rules in the financial sector, aims to curb the use of US cloud infrastructure in developing AI that could pose national security threats, particularly by Chinese entities. It would effectively limit Chinese firms' access to essential data centers and servers critical for AI development and could have significant implications for how cloud services monitor and manage foreign client data.

The Commerce Department, under Secretary Gina Raimondo, is spearheading this initiative to address concerns over AI development that could be used for military purposes or other harmful activities. This move follows President Joe Biden's directive in October to enhance surveillance of foreign entities using AI for potentially malicious cyber activities.

While the US has already taken steps to restrict China's access to advanced semiconductors, this new proposal represents a broader strategy to limit Beijing's technological advancements in AI and other key areas. The rule also reflects Washington's view of China as a major strategic competitor on the global stage.

The US is seeking public comments on the proposed regulation until April 29 before finalizing it. The Commerce Department may consider exemptions for foreign subsidiaries of US cloud providers and is working to define the scope of US cloud services under this rule.

The regulatory push comes amid broader US efforts to constrain China's tech capabilities, including tightened controls on chip exports and sanctions against specific Chinese firms. These measures aim to prevent Chinese tech leaders from using international intermediaries to circumvent US restrictions, especially in the semiconductor sector.

🔍 SOURCE: https://www.bloomberg.com/news/articles/2024-01-29/us-wants-cloud-firms-to-reveal-foreign-clients-in-china-ai-race?srnd=premium