Microsoft has voiced concerns that the Trump administration’s AI export restrictions could undermine America’s leadership in the global AI market and unintentionally benefit China.
In a blog post on the company’s website, Microsoft president and vice chair Brad Smith argued that the ‘AI Diffusion Rule,’ introduced near the end of the previous administration, limits the export of essential AI components to many rapidly developing and strategically important markets. Smith stated that the rule runs contrary to two of the Trump administration’s priorities: strengthening US AI leadership and reducing the nation’s substantial trade deficit.
If maintained, Smith warned, the rule would provide China with a strategic advantage in expanding its own AI technology. The rule, which took effect approximately 120 days after its January publication, sets limits on the volume of AI-focused chips that can be sold to most countries. It also includes measures to restrict the transfer of weights for advanced AI models to countries deemed untrusted.
The rule categorizes nations based on the Biden administration’s assessment of their trustworthiness. While a select group, including Japan, the UK, South Korea, and the Netherlands, are effectively exempt, countries such as Singapore, Israel, Saudi Arabia, and the United Arab Emirates face restrictions. Nations like Russia, China, and Iran are entirely blocked.
Microsoft objects to these measures because the caps impact countries where it has datacenters, potentially restricting access to GPUs and other critical infrastructure. “These are countries where we and many other American companies have significant datacenter operations,” Smith noted.
Smith further elaborated that the restrictions place numerous US allies and partners in a “Tier Two” category, imposing quantitative limits on the ability of American tech companies to build and expand AI datacenters in those countries. Smith emphasized the impact on countries such as Switzerland, Poland, Greece, India, Indonesia, Israel, the UAE, and Saudi Arabia.
This “Tier Two” status, Microsoft claims, could erode customer confidence in its ability to provide the necessary AI computing capacity, potentially driving affected countries to seek AI infrastructure and services from elsewhere. “And it’s obvious where they will be forced to turn. If left unchanged, the Diffusion Rule will become a gift to China’s rapidly expanding AI sector,” Smith asserted.
Microsoft isn’t alone in its criticism. In an interview with Bloomberg, Amazon chief Andy Jassy echoed these concerns: “I don’t know how this administration feels about it, but I would say that we share the concern that it has limitations on certain countries who are natural allies of the US.”
Nvidia, a major GPU manufacturer, also raised concerns about the legislation, stating that the new rule “threatens to squander America’s hard-won technological advantage.” Ned Finkle, VP of government affairs at Nvidia, warned that the Biden administration’s rules would only “weaken America’s global competitiveness, undermining the innovation that has kept the US ahead.”
The US Department of Commerce was approached for comment regarding a potential review of the AI Diffusion Rule, but no response has been issued.
