The new regulations will set a limit on the number of AI chips that can be exported to most nations, while allowing unrestricted access to U.S. AI technology for its closest allies. Exports to China, Russia, Iran, and North Korea will continue to be prohibited.
These regulations, introduced during the final days of President Joe Biden's administration, extend beyond China and are designed to help the U.S. preserve its leading position in AI by exerting control over its global distribution.
"Currently, the U.S. is at the forefront of AI development and chip design, and it is essential that we maintain this leadership," stated Commerce Secretary Gina Raimondo.
This regulatory framework concludes a four-year effort by the Biden administration to limit China's access to advanced chips that could bolster its military capabilities, while also seeking to reinforce U.S. dominance in AI by closing existing loopholes and implementing new safeguards on chip distribution and AI development worldwide.
It remains uncertain how the incoming administration of President-elect Donald Trump will implement these new regulations, although both administrations recognize the competitive threat posed by China. The regulations are expected to take effect 120 days after publication, allowing the Trump administration time to consider its approach.
New restrictions will also be applied to advanced graphics processing units (GPUs), which are essential for powering data centers that train AI models. The majority of these chips are produced by Nvidia, based in Santa Clara, California, with Advanced Micro Devices also contributing to the market. In morning trading, Nvidia shares fell approximately 5%, while AMD shares decreased by about 1%.
Major cloud service providers, including Microsoft, Google, and Amazon, will have the opportunity to apply for global authorizations to establish data centers.
Once approved, cloud providers will no longer require export licenses for AI chips, enabling them to establish data centers in nations that struggle to import sufficient chips due to U.S.-imposed quotas. Shares of all three companies experienced a decline of approximately 1%.
To receive approval, authorized companies must adhere to strict conditions and regulations, which include security protocols, reporting obligations, and a demonstrated commitment to human rights. Until now, the Biden administration has enforced extensive restrictions on China's access to advanced chips and the machinery needed for their production, updating these controls annually to further tighten restrictions and address countries that might divert technology to China.
NVIDIA EXPRESSES CONCERNS OVER 'OVERREACH'
Given that the new regulations significantly impact the global landscape for AI chips and data centers, influential industry leaders voiced their concerns about the plan even prior to its release. Nvidia described the regulations as "sweeping overreach," asserting that the White House is imposing limitations on "technology that is already prevalent in mainstream gaming PCs and consumer hardware." Earlier this month, data center provider Oracle contended that these rules would effectively transfer "most of the global AI and GPU market to our Chinese competitors."
These restrictions do not extend to gaming chips. The regulations establish global licensing requirements for advanced chips, with certain exceptions, and also impose controls on the "model weights" of the most sophisticated "closed-weight" AI models. Model weights are crucial for decision-making in machine learning and represent some of the most valuable components of an AI model.
The regulation categorizes countries into three tiers. Approximately 18 nations, including Japan, the United Kingdom, South Korea, and the Netherlands, will be largely exempt from the regulations. Around 120 other countries, such as Singapore, Israel, Saudi Arabia, and the United Arab Emirates, will face specific country caps. Meanwhile, nations under arms embargoes, including Russia, China, and Iran, will be completely prohibited from accessing the technology.
U.S.-based companies, such as Amazon Web Services and Microsoft, that are likely to obtain global authorizations will be restricted to deploying only 50% of their total AI computing capacity outside the United States. Furthermore, they can allocate no more than 25% of this capacity to countries classified as Tier 1 and a maximum of 7% to any individual non-Tier 1 country.
"The effectiveness of this regulation over the next decade or so will depend on the new administration," stated Meghan Harris, who served as a national security official during the initial Trump administration. "They recognize that maintaining a strong domestic industry is crucial in the competition against China."
In reaction to the newly established regulations, China's Commerce Ministry announced that it would implement necessary measures to protect its "legitimate rights and interests."
While AI holds the promise of enhancing access to healthcare, education, and food, it also poses risks, including the potential development of biological and other weapons, facilitation of cyberattacks, and support for surveillance and human rights violations.
U.S. National Security Adviser Jake Sullivan emphasized, "The United States must be ready for rapid advancements in AI capabilities in the coming years, as these developments could significantly impact both the economy and national security."