Artificial Intelligence

Microsoft urges rule change on US exports of AI chips to Gulf

February 28, 2025, 3:45 PM

Microsoft president Brad Smith: restricting AI sales to Gulf states 'will give China a strategic advantage'

Microsoft wants wider AI chip sales
Gulf states are ‘tier two’
May look to China instead

Microsoft has asked President Trump’s administration to ease export restrictions on artificial intelligence chips for a group of US allies, including the UAE and Saudi Arabia.

The AI Diffusion Rule, introduced in the final days of President Joe Biden’s administration, controls access to US-made advanced AI tech, particularly high-performance computing chips and AI models.

In a blog post, Microsoft president Brad Smith said the rule limits the ability of US tech companies to build and expand AI data centres in allied countries such as the UAE, Saudi Arabia, Switzerland, Singapore, India and Indonesia.

“Left unchanged, the Biden rule will give China a strategic advantage in spreading over time its own AI technology, echoing its rapid ascent in 5G telecommunications a decade ago,” Smith wrote in the post.

The AI Diffusion Rule was introduced to limit China’s access to computing power needed to develop its AI capabilities.

Countries were placed into three tiers to manage exports and deployment, with the top tier consisting of the US and 18 allied nations in Europe as well as Australia, New Zealand, Japan, South Korea and Taiwan.

The second tier, which includes around 150 countries, is subject to limits on imports and usage, with caps designed to keep their AI capabilities at least one generation behind cutting-edge systems.

The third tier of around two dozen includes countries such as China, Iran, North Korea and Russia, which are blocked from accessing advanced AI infrastructure.

Smith said the rule’s unintended consequence is to encourage tier two countries to look elsewhere for AI infrastructure and services, which he said “will become a gift to China’s rapidly expanding AI sector”.

“Customers in tier two countries now worry that an insufficient supply of critical American AI technology will restrict their opportunities for economic growth,” Smith wrote.

Microsoft will this year spend $80 billion building AI infrastructure around the world, with more than half in the US, he said.

The ability to grow and continue investing at that level, he said, “depends in an important part on exporting our technology services”.

“This requires building AI infrastructure in other countries, so AI services can be accessed and used with low latency by local enterprises and consumers,” he said.

The Wall Street Journal said that Trump administration officials are considering steps to strengthen the restrictions while simplifying the export export-control control rules.