From Chips to Clouds: US Tightens Grip on Technology Race with China

While not fought with conventional weapons, the rivalry between the US and China for technological dominance simmers just below the surface. Over the past months, this “unseen war” has unfolded across multiple sectors, including semiconductors and artificial intelligence, and is now stretching to cloud computing services.

But why Cloud services?

AI models require large datasets for training and evaluation. Not every company can afford to put up the upfront costs to purchase and maintain the hardware. So, they use cloud services, usually as Infrastructure as a Service (IaaS). 

So, cloud providers like Amazon Web Services, Microsoft Azure, Google Cloud Platform, etc., provide on-demand access to vast computing resources, including GPUs and specialized hardware, that can be scaled up or down as needed.

Late in January, the U.S. Department of Commerce (DoC) proposed regulating cloud services, especially to countries that are not US allies – a move seemingly targeted at restricting China’s AI development progress. 

The proposal aims to mandate “Know Your Customer” (KYC) for US cloud services, including a “Customer Identification Program,” and report to the DoC when large AI models are trained on their IaaS. It also would authorise “special measures” for providers to deter foreign malicious cyber actors’ use of U.S. IaaS products. 

US And China Tech War Extend to Cloud Service 

Note that the US is a global cloud service powerhouse. Several tech companies, even in China, rely heavily on cloud services from US companies. The proposed rule potentially opens a window for the US to further restrict China from training and building AI programs on its infrastructure. 

The US government had already placed an export control restriction in China, which stopped the selling of high-end chips to China for AI development. US firm Nvidia was a major supplier to Chinese tech companies. However, the policy has since disrupted the flow.

Most of the customers have turned to domestic alternatives to continue operations. It remains uncertain how much impact the potential restriction of cloud services to China will have on its AI developments and for how long.

It’s likely that some companies would use shell firms to gain access or look for other alternatives elsewhere, possibly local providers. However, this translates to China becoming more independent from the US in the area of technological development.