US Wants Cloud Firms to Flag Foreign Users in China AI Race (2)

The US wants cloud service providers such as Amazon.com Inc. and Microsoft Corp. to identify and actively investigate foreign clients developing artificial intelligence applications on their platforms, part of a widening tech conflict between Washington and Beijing.

The Biden administration proposal, released Monday, requires the firms to reveal foreign customers’ names and IP addresses. Amazon and its peers, which include Alphabet Inc.’s Google, would need to develop a process to collect those details and report any suspicious activity, according to draft rule published Sunday.

If implemented, Washington could use those requirements to choke off a major avenue through which Chinese firms may access the data centers and servers crucial to training and hosting AI. They also place the onus of collecting, storing and analyzing customer data on the cloud services, a burden not unlike strict “know-your-customer” rules that govern the financial industry.

One official at a major US cloud provider, who asked not to be identified discussing internal assessments, said that collecting detailed customer information is difficult and costly, and warned that US firms risk being at a disadvantage compared to foreign competitors who wouldn’t face such requirements.

Fred Humphries, vice president of US government affairs at Microsoft, said in a statement that the company welcomes know-your-customer and cybersecurity requirements for AI infrastructure and looks forward to providing input on the draft rule. A representative for Amazon didn’t respond to a request for comment, and a Google spokesperson declined to comment.

China’s development of AI and other next-generation technologies is a top concern for the Biden administration, which sees Beijing as its primary global strategic competitor.

Secretary Gina Raimondo said Friday that her team is focused on eradicating national security threats posed by AI development, an effort likely to focus on firms from China. Washington, which has already worked to constrain Beijing’s access to the most advanced semiconductors, wants to limit Chinese firms’ ability to develop AI with potential military capabilities.

“These models getting in the hands of non-state actors or people that aren’t our allies is very dangerous,” Raimondo said in Washington.

Read More: US Wants Cloud Firms to Report Foreign Users Building AI

Chinese Foreign Ministry spokesman Wang Wenbin said at a regular press briefing in Beijing on Monday that the US should cooperate on AI, “rather than decoupling, breaking chains and building fences.”

President Joe Biden in October directed the Commerce Department to require cloud disclosures in an effort to detect foreign actors that might use AI to launch what the proposal dubs “malicious cyber-enabled activities.”

Specifically, the US seeks to help cloud providers address risks including “fraud, theft, facilitation of terrorism, and other activities contrary to U.S. national security interests,” the Commerce Department said in a Monday statement. The US is asking for comments on the proposed rule through April 29 before finalizing the regulation.

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Commerce said it may provide an exception to the identification rules for the foreign subsidiaries of US cloud providers. It also referred to commenters so far who’ve pushed for the broadest possible definition of a US cloud service, adding it will clarify whether foreign subsidiaries fall under the rules.

Washington has tried to rein in China’s advances by restricting chip exports to the country and sanctioning individual Chinese firms, but the country’s tech leaders have managed to make significant breakthroughs despite US curbs.

The US in October tightened its controls to capture more chips, equipment and geographies. One key update targeted Chinese-headquartered companies operating in more than 40 countries, an attempt to prevent those firms from using other nations as intermediaries to secure semiconductors they can’t access at home.

Read More: Billionaires and Bureaucrats Mobilize China for AI Race With US

(Updates industry comment from fourth paragraph.)

--With assistance from Dina Bass and Colum Murphy.

To contact the reporters on this story:
Courtney Rozen in Arlington at crozen4@bloomberg.net;
Mackenzie Hawkins in Washington at mhawkins71@bloomberg.net

To contact the editors responsible for this story:
Bernard Kohn at bkohn2@bloomberg.net;
Peter Elstrom at pelstrom@bloomberg.net

Edwin Chan, Ramsey Al-Rikabi

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