US approves export of AI chips to UAE amid Microsoft-G42 partnership

The US government has approved the export of advanced AI chips to a Microsoft-run facility in the United Arab Emirates (UAE), marking a significant step in the tech giant’s partnership with Emirati AI firm G42.

This decision comes despite earlier concerns from US lawmakers over potential national security risks, reported Axios.

Announced in April, the partnership aims to boost the UAE’s AI capabilities using Microsoft Azure infrastructure and services. As part of the deal, Microsoft President Brad Smith joined G42’s board, underscoring the strong collaboration between the two organizations.

However, the deal’s second phase, which involves transferring export-restricted AI chips and sensitive model weights, had sparked scrutiny. Critics were particularly wary of G42’s historical links to Chinese firms tied to surveillance and military projects, raising questions about the broader implications of this ambitious partnership, which seeks to establish the UAE as a global AI leader.

“While Chinese presence in the MEA is significant this initiative might be a way to reduce the Chinese foothold with American alternatives,” said Kartikey Kaushal, senior analyst at Everest Group. “By facilitating access to advanced AI capabilities, the US aims to strengthen alliances and promote its technological standards in the region and counter China’s Digital Silk Road initiative.”

Background: a summer of scrutiny

In July, a group of US lawmakers, including Representative Michael McCaul, Chair of the House Foreign Affairs Committee, and Representative John Moolenaar, leader of the Select Committee on China, urged the Biden administration to investigate the Microsoft-G42 agreement. They highlighted concerns about the potential transfer of sensitive US-origin technology, including export-restricted AI chips and advanced model weights.

The lawmakers’ letter to National Security Adviser Jake Sullivan emphasized the need for stricter regulations to mitigate risks of sensitive technology falling into the wrong hands. They cited G42’s extensive business relationships with Chinese firms, including those linked to the military, and its historical ties to Emirati cybersecurity firm DarkMatter, previously investigated for espionage activities.

“The deal deserves continued scrutiny to ensure that our strategic and national security interests are protected,” the lawmakers wrote in the letter then. They also pointed to the UAE’s deepening AI cooperation with China, marked by President Sheikh Mohamed bin Zayed Al Nahyan’s recent visit to Beijing.

A conditional approval

Despite these concerns, the US government approved the export license in September, under stricter conditions. The new rule introduces the “Validated End User” (VEU) program, allowing foreign data centers to receive AI chips like those produced by Nvidia under a general authorization, bypassing the need for US companies to seek individual export licenses.

The approval of the Microsoft-G42 deal prohibits individuals from Group D:5 countries — those under US arms embargo, including China — from accessing the chips or the facility, the report said citing sources familiar with the deal.

Additional safeguards require Microsoft to prevent the chips from being used for AI model training by personnel associated with the Chinese government or organizations headquartered in China. Individuals on the Treasury Department’s sanctions list are also barred from involvement, the report added.

The chips, reportedly from a leading manufacturer such as Nvidia, will play a critical role in Microsoft and G42’s initiatives, including the development of advanced AI models. G42 is already leveraging US data centers to train Jais, its bilingual Arabic-English large language model, in partnership with AI chipmaker Cerebras.

Balancing innovation and security

The US government’s decision reflects a delicate balancing act: fostering global innovation while safeguarding national security.

G42 has made efforts to mitigate concerns, including removing Huawei hardware from its systems and divesting from certain Chinese companies. However, critics remain cautious, noting that these divestments were absorbed by a fund overseen by G42’s parent company, owned by Sheikh Tahnoon bin Zayed Al Nahyan, the UAE’s national security adviser.

Besides, there have been instances when Chinese firms tried to bypass US export restrictions to access advanced AI chips and AI models via cloud routes.

“The major threat of the Microsoft-G42 partnership is potential technology transfer to China, data privacy and ethical concerns, and national security implications,” pointed out Kaushal. “While these challenges have strong implications associated, they can be mitigated through licensing restrictions, robust compliance frameworks, regular audits and monitoring, and controlled R&D environments.”