The US is reportedly introducing new restrictions on US investment in China’s artificial intelligence sector. The development came as part of efforts to curb the potential build-up of China’s military capabilities through U.S. expertise.
What happened: The impending regulations are under final review and will be announced soon. These rules are based on an executive order issued by President Joe Biden in August. Reuters reported on Monday that the Office of Management and Budget is currently reviewing the rules, which typically occurs within a week before they are published.
Former Treasury Department official Laura Black emphasized the strategic timing of these regulations, coming just before the Nov. 5 U.S. presidential election. The Treasury Department previously released draft regulations in June, soliciting public comment and outlining specific exceptions.
The proposed regulations focus on investments in AI, semiconductors, microelectronics, and quantum computing. The provisions require U.S. investors to notify the Treasury Department of certain transactions and specify prohibited uses of AI systems and computational power thresholds.
Related article: US investigates possible sanctions violations by TSMC, threatens Apple’s iPhone chip production
Black expects the final rule will clarify the scope and investment criteria for AI. Exceptions may include publicly traded securities, certain limited liability partnerships, and syndicated financings.
The Treasury Department has not yet responded to Benzinga’s questions.
Why it matters: U.S. restrictions on AI investment in China come against the backdrop of China’s increasing investment in AI infrastructure. Despite US sanctions, Chinese technology giants such as Alibaba Group Holding Ltd.’s BABA, Tencent and Baidu’s BIDU have significantly increased their investments in AI. In the first half of 2024, these companies invested 50 billion Chinese yuan ($7 billion), a significant increase from the previous year, focusing on processors and infrastructure for AI training.
Additionally, Chinese AI companies, including startups and giants such as Alibaba and ByteDance, are making progress in reducing AI costs. They are optimizing their hardware to counter US chip sanctions and focusing on smaller data sets.
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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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