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Biden’s New Export Restrictions on AI Chips: Aiming to Fortify US Dominance Against China and Russia

Hannah Perry | January 9, 2025

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The Biden administration is preparing a significant set of export restrictions on advanced artificial intelligence (AI) chips, aiming to limit access for countries like China and Russia to cutting-edge technologies. According to a Bloomberg report, these proposed measures are part of a broader strategy to consolidate U.S. leadership in AI development while ensuring global compliance with American security and human rights standards.

America’s Bid to Control AI Chips

The upcoming regulations are set to introduce a three-tier system for governing the export of AI chips, which are crucial for advanced computational tasks and data center operations. Here’s how the system is structured:

Tier 1 Countries

This group comprises the United States and 18 key allies, including Germany, Japan, South Korea, and Taiwan. Companies headquartered in these nations will face minimal restrictions. They will have the ability to apply for blanket U.S. government permissions to ship chips globally. To qualify, firms must meet several strict conditions, such as:

  • Maintaining at least 75% of their computing power within Tier 1 countries.
  • Limiting operations outside these countries.
  • U.S.-based companies must maintain at least half of their computing power domestically to secure this status.

Tier 2 Countries

This category includes the majority of global nations. For these countries, the U.S. will impose limits on the total number of AI chips they can import—approximately 50,000 graphic processing units (GPUs) over three years, from 2025 to 2027. However, companies can bypass these national limits to obtain higher import caps by achieving “validated end-user” (VEU) status. To gain this status, companies must:

  • Demonstrate a credible track record of meeting U.S. government cybersecurity, physical security, and human rights compliance standards.

Tier 3 Countries

This group includes China, Macau, and those nations under U.S. arms embargoes, including Russia. These countries will face the most stringent restrictions, with comprehensive prohibitions on shipments of advanced AI chips to their data centers. The ultimate goal of establishing these tiers is to ensure that U.S. and allied nations maintain superior computing power relative to the rest of the world.

Nvidia Opposes the Proposed Measures

The suggested restrictions have already drawn backlash from key players within the semiconductor industry. Nvidia, the world’s leading AI chipmaker, expressed concerns that the limitations could hinder economic growth and erode U.S. technological leadership. In a statement, the company noted, “A last-minute rule restricting exports to most of the world would not reduce the risk of misuse but would threaten economic growth and U.S. leadership.”

The Semiconductor Industry Association echoed these sentiments, urging the federal government to proceed cautiously with such a significant policy change, especially during a presidential transition. The group emphasized the necessity for a deliberative process to ensure that the U.S. retains its global competitiveness in semiconductor manufacturing and AI technology.

AI Software Under Control

The new export regulations will encompass software as well, particularly closed AI model weights—numerical parameters crucial for AI model decision-making. These proposed regulations will bar hosting such weights in Tier 3 countries while imposing security requirements for Tier 2 nations. However, open-weight models, which allow public access to their underlying code, will be exempt from these restrictions. Companies looking to fine-tune open models in Tier 2 countries will require U.S. government approval if significant computational resources are involved in the process.

US Aims for AI Leadership

The Biden administration considers these measures essential for preserving U.S. dominance in AI development. By controlling advanced chip exports and imposing strict regulations, the U.S. aims to provide its allies with superior computing capabilities while stifling the technological progress of adversaries. Lawmakers have underscored the strategic importance of these actions, indicating in a letter to Commerce Secretary Gina Raimondo their intent to leverage U.S. AI technology to “pry both companies and countries out of Beijing’s orbit.”

Implications for Global Markets

If enacted, these restrictions will significantly alter the global semiconductor landscape. Tier 1 countries will benefit from seamless access to U.S. chips, while Tier 2 nations will need to adhere to stringent standards to avoid falling behind in AI development. Conversely, Tier 3 countries, particularly China, face considerable setbacks in pursuing their technological ambitions. Following reports of the impending restrictions, shares of Nvidia and AMD, two major players in the AI chip sector, have experienced slight declines, reflecting the industry’s apprehension regarding the potential ramifications of these sweeping measures.