The Stakes of the Global AI Race
A global competition is heating up, one that will determine which nation supplies the technology that powers the burgeoning artificial intelligence (AI) economy. As Vice President Vance rightly pointed out at the recent AI Summit in Paris, the focus must be on AI opportunities, lighter regulations, and prioritizing the global reach of American AI. However, a recent regulation from the Biden administration, if left unchanged, threatens to hinder America’s position in this critical race.
The Biden administration’s interim final AI Diffusion Rule places restrictions on the export of essential American AI components to several rapidly growing and strategically vital markets. This rule, as it stands, works against two key priorities of the Trump administration: strengthening U.S. leadership in AI and reducing the nation’s considerable trade deficit.
If the Biden administration’s rule is not revised, it risks handing a strategic advantage to China, allowing the nation to spread its AI technology over time, as it did with 5G telecommunications a decade ago.
Balancing Security and Economic Opportunity
As a company, we support the need to safeguard national security by preventing adversaries from acquiring advanced AI technology. The AI Diffusion Rule does contain certain positive measures that should be retained. For example, the comprehensive qualitative provisions would ensure that AI technology components are utilized in certified, secure, and trusted datacenters. This helps prevent the shipment of advanced chips to entities that fail to meet these standards, reducing the risk of chip diversion to China.
Similarly, the rule correctly mandates strict requirements for these trusted datacenter operators to prevent chip diversion and ensure that advanced AI services are not accessible to adversaries. This presents a crucial opportunity to further strengthen these provisions, including giving the Commerce Department the necessary resources to implement the rule effectively. This would expedite approval processes for companies and improve enforcement, particularly against unlawful chip diversion.
The Problem with the Tier System
However, a significant problem persists. The Biden rule goes too far in its restrictions. It categorizes many key U.S. allies and partners as Tier Two countries, imposing quantitative limits on the capacity of American tech companies to build and expand AI datacenters in those nations. This includes many American allies such as Switzerland, Poland, Greece, Singapore, India, Indonesia, Israel, the UAE, and Saudi Arabia. These countries are home to many American companies with established datacenter operations.
This Tier Two status undermines a crucial element for any successful business: the confidence of customers in a company’s ability to supply their future AI computing needs. Customers in Tier Two countries now worry they cannot buy enough of the AI computing capacity they will require for future economic growth. A likely outcome of this approach is to push Tier Two countries to seek AI infrastructure and services elsewhere—a gift to China’s rapidly expanding AI sector.
Investment at Risk
This situation unfolds precisely as the American tech sector plans unprecedented investment in AI computing capacity. Our plans at Microsoft are illustrative. This year alone, the company will spend $80 billion to build AI infrastructure worldwide, more than half of this total on U.S. soil. The vast majority of our computing power will be established within the United States. However, the ability to sustain further growth and investment at this level, including within the United States, depends in part on exporting our technology services. This requires building AI infrastructure in other countries so enterprises and consumers can access and utilize AI services with low latency.
Ironically, the Diffusion Rule discourages what should be deemed an American economic opportunity: the export of world-leading chips and technology services. The potentially negative impact on American economic growth does not end there. As the tech sector invests billions to build datacenters globally, we are developing global supply chains that combine international and American suppliers of more traditional manufactured goods.
I witnessed this firsthand during a visit to Warsaw last week with Prime Minister Donald Tusk, where we announced a $700 million expansion of Microsoft’s datacenter infrastructure in Poland. American workers manufacturing advanced electrical generators in Indiana, which are then shipped to Poland, are among those who will benefit.
The irony is clear: At the same time the Trump administration urges Europe to buy more American goods, the Biden Diffusion Rule leaves partners like Poland questioning why they have been relegated by the U.S. to Tier Two status and have an uncertain ability to buy more American AI chips in the future.
A Path Forward
There is a clear path forward for the Trump administration. The overly complex rule, which spans 41 pages in the Federal Register, can be right-sized. Simplify the rule. Stop relegating American friends and allies to a second tier, which jeopardizes their confidence in consistent access to American products. Get rid of the quantitative limits that interfere with the economic market. Preserve the essential elements, such as the qualitative security standards and restrictions on AI usages that secure national security.
We must recognize the obvious: America’s AI race with China begins at home. It is built on the capacity of innovative American firms to bring manufactured goods and technology services to like-minded countries around the world. We are prepared to invest. What is needed now is an AI diffusion rule that enables us to do so.
