US Set To Restrict China’s Access To Cloud Computing Services From Amazon, Microsoft

Photo taken on June 19, 2023, shows the logo of Tencent and the MaaS service in Hangzhou, Zhejiang province, China. On the same day, Tencent Cloud announced the MaaS panorama, relying on Tencent Cloud TI platform to create a large model selection store for the industry, providing customers with one-stop large model services. Based on Tencent HCC high-performance computing cluster and large model capabilities, Tencent Cloud announced that it has provided more than 50 large model industry solutions for more than 10 industries, including cultural tourism, government affairs, and finance. (Costfoto/NurPhoto via Getty Images)

The U.S. is preparing to restrict Chinese companies from accessing to U.S. cloud-computing services from Amazon.com, Inc (NASDAQ: AMZN) and Microsoft Corp (NASDAQ: MSFT). 

U.S. Secretary of State Antony Blinken testifies during a House Appropriations Committee hearing on the State Department 2024 budget at Capitol Hill on March 23, 2023, in Washington, DC. The U.S. will be restricting Chinese company from accessing cloud services with the American big tech companies. (Sha Hanting/China News Service/VCG via Getty Images) 

If the new rule is implemented, it would mandate U.S. cloud-service providers to obtain permission from the government before offering cloud-computing services that utilize advanced artificial intelligence chips to customers in China, according to the Wall Street Journal.

In cloud computing, Microsoft Azure and Amazon Web Services stand as the dominant forces worldwide. They also face competition in China from the likes of Alibaba Group Holding Ltd. (NYSE: BABA), utilizing partnerships with local data center providers affiliated with the government.

Just days before Treasury Secretary Janet Yellen’s visit to China, Beijing made an announcement on Monday regarding export restrictions on metals that are crucial for advanced chip manufacturing. Yellen’s visit follows closely on the heels of Secretary of State Antony Blinken’s meeting with China’s President Xi Jinping in Beijing.

The proposed restriction is viewed as an effort to address a notable loophole. Experts in national security have raised concerns that Chinese A.I. companies may have been able to evade existing export control regulations by leveraging cloud services. 

Such services enable customers to access robust computing capabilities without needing controlled-list equipment, including chips such as NVIDIA Corp’s (NASDAQ: NVDA) A100 chips.

The Microsoft Teams logo is seen in this photo illustration in Warsaw, Poland on January 25, 2023. Several Microsoft services were unable to be reached by tens of thousands around the world on Wednesday according to Downdetector.The outage was caused, according to Microsoft by a network change. Services affected included Outlook, Teams and Xbox Live. (Jaap Arriens/NurPhoto via Getty Images) 

The Biden administration intends to strengthen export controls, initially announced in October, to impose limitations on the sales of specific artificial intelligence chips to China. 

“If any Chinese company wanted access to Nvidia A100, they could do that from any cloud service provider. That’s totally legal,” said Emily Weinstein, a research fellow at Georgetown Center for Security and Emerging Technology.

As part of the forthcoming proposal by the Commerce Department, anticipated to be released in July, the U.S. aims to revise export controls to increase the difficulty of selling specific chips to China without obtaining a license.

The ban on cloud services would mark the most recent development in a series of reciprocal measures taken by Washington and Beijing concerning semiconductors and other cutting-edge technologies.

Produced in association with Benzinga

Edited by Alberto Arellano and Joseph Hammond