ByteDance the parent firm of TikTok has found a way to get Nvidia’s most powerful artificial intelligence (AI) chips for its US operations, despite restricting US export regulations which aimed at stopping advanced technology from entering China. Reportedly, ByteDance is leasing the highly popular CPUs from US cloud computing company Oracle, according to people with expertise in the field who addressed the Information.
In 2022, the US government banned the direct sale of advanced artificial intelligence processors to China on the grounds of national security. ByteDance found, meanwhile, that it could still make use of the chips by renting them from US-based companies like Oracle and using them within US borders. Other significant Chinese tech businesses are also interested in this sanction gap.
Other Chinese tech giants seek similar arrangements
Alibaba and Tencent, two cloud service providers, have been reported to have approached Nvidia to purchase its top-tier chips for use in data centers they plan to run in the US. Furthermore, China Telecom, a state-owned telecom company in China, with an unidentified name approached US cloud providers to enter into similar leasing agreements.
Although not specifically illegal, these tactics violate the principles of US chip regulations, which aim to block China’s AI development and keep Beijing from using this technology for military or spying reasons. However, if the chips are kept and utilized in the US, the existing regulations do not expressly forbid Chinese businesses from obtaining them.
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Regulators face difficulties in closing gaps
Because they believed it went against the restrictions, a few smaller US cloud providers already declined ByteDance’s and China Telecom’s proposals to provide these types of equipment that included Nvidia’s most advanced technology. However, Oracle seems to have decided that its prospects for revenue surpassed these concerns.
Earlier this year, the US Commerce Department—which is in charge of administering export controls—proposed a rule requiring US cloud providers to confirm the identity of overseas clients and notify authorities if they were developing AI models that might be exploited maliciously. Cloud providers rejected the rule, claiming that the costs associated with complying would surpass the benefits and as a result, it is still in uncertainty.
Regulators may face further challenges if this specific gap is closed since Chinese tech giants companies such as Tencent and Alibaba, which have their own data centers in the US, may still be able to purchase and utilize the prohibited chips.
