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State-linked Chinese entities are reportedly using cloud services from Amazon.com Inc. (NASDAQ:AMZN) and other providers to bypass U.S. export restrictions and access advanced Nvidia Corp. (NASDAQ:NVDA) chips and artificial intelligence capabilities.
What Happened: U.S. export restrictions were imposed over the past two years to limit the Chinese military’s capabilities by curtailing their access to high-end AI chips. However, these entities have found a loophole by using cloud services, which are not considered a violation of U.S. regulations as they only regulate exports or transfers of a commodity, software, or technology, Reuters reported on Friday.
A review by Reuters of over 50 tender documents posted over the past year on publicly available Chinese databases revealed that at least 11 Chinese entities have sought access to restricted U.S. technologies or cloud services.
Four of these entities explicitly named Amazon Web Services (AWS) as a cloud service provider, accessing the services through Chinese intermediary companies.
For instance, Shenzhen University spent 200,000 yuan ($27,996) on an AWS account to gain access to cloud servers powered by Nvidia’s A100 and H100 chips for an undisclosed project. The university obtained this service via an intermediary, Yunda Technology Ltd Co., the report said.
Meanwhile, the U.S. government is considering tightening regulations to restrict access through the cloud. Legislation was introduced in Congress in April to empower the Commerce Department to regulate remote access to U.S. technology, but it remains unclear when it will be passed.
Chinese entities are also seeking access to Microsoft Corp.‘s (NASDAQ:MSFT) cloud services. For example, Sichuan University is building a generative AI platform and purchasing 40 million Microsoft Azure OpenAI tokens to support the delivery of this project.
“AWS complies with all applicable U.S. laws, including trade laws, regarding the provision of AWS services inside and outside of China,” Amazon’s cloud business spokesperson said, according to the report.
See Also: What’s Going On With Lucid Group Stock On Tuesday?
Why It Matters: Earlier in April, despite U.S. efforts to restrict the sale of advanced technology to China, the country has managed to acquire high-end Nvidia chips through third-party vendors.
The chips were integrated into servers made by Super Micro Computer Inc (NASDAQ:SMCI), Dell Technologies Inc (NYSE:DELL), and Gigabyte Technology Co Ltd.
China’s efforts to bolster its chip sector have also seen the country announcing a new $47.5 billion public fund aimed at fueling the country’s self-reliance in manufacturing advanced chips.
Meanwhile, Amazon has been intensifying its efforts to recruit more sellers in China to expand its affordable product offerings in the U.S. and other markets to compete with Chinese rivals like PDD Holdings Inc‘s Temu, Alibaba Group Holding Limited, and JD.com, Inc.
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Image Via Shutterstock
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
