Scoop: Advanced AI chips cleared for export to UAE under Microsoft deal

• Lawmakers have raised concerns over the partnership, saying there is a risk it could open up a back door for China to access the advanced technology.
• The House China Select Committee earlier this year found G42 has "extensive ties" to several Chinese firms involved in surveillance and research for the military.

Catch up quick: Earlier this year, Microsoft said it was expanding its collaboration with G42 and investing $1.5 billion in the company.

• G42 is chaired by the UAE's national security adviser Sheikh Tahnoon bin Zayed al-Nahyan — a force in the country's push to become a global AI powerhouse.
• Microsoft and G42 announced a few months later that they would team up to launch two new AI institutes in Abu Dhabi.
• The agreement came after G42 took steps to try to calm the U.S. government's nerves about its ties to Chinese companies. The company said it would remove hardware made by China's telecom giant Huawei from its systems.
• G42 also divested from Chinese companies, but Bloomberg reported those investments were taken over by a fund overseen by Sheikh Tahnoon, whose private investment firm is G42's parent company.

Friction point: U.S. government approval to export the advanced AI chips that are key to the Microsoft-G42 partnership was delayed over continued concerns about the technology ending up in China's hands. The UAE and China remain close economic partners in other sectors and maintain military ties.

• In September, Microsoft president and vice-chair Brad Smith, who received a seat on G42's board through the investment deal, told the Financial Times that "clarity and consistency" was needed from the U.S. government around export controls.
• The Biden administration has considered capping export licenses for advanced AI chips to certain countries, Bloomberg reported in October.

Zoom in: The approved export license requires Microsoft to prevent access to the facility by personnel who are from Group D:5 countries, which are nations with U.S. arms embargoes, or who are on the Bureau of Industry and Security (BIS) Entity List, according to two sources familiar with the deal.

• The restrictions cover people physically in China, the Chinese government or personnel working for any organization headquartered in China.

• Individuals sanctioned by the Treasury Department are also not allowed access, according to a third source with knowledge of the issue. The license was approved in September, per the source.
• The license prohibits the facility and its chips to be used for model training for people from Group D:5 countries, including China, according to two of the sources.
• Sources couldn't confirm the chip manufacturer or type, but Nvidia has dominated the advanced AI chip market.

Microsoft and the Commerce Department declined to comment. G42 did not respond to a request for comment.

The big picture: While G42 builds its AI infrastructure in the UAE, it is training foundation models, including a bilingual Arabic-English large language model called Jais, at data centers in the U.S. through a partnership with AI chipmaker — and Nvidia competitor — Cerebras.

• G42 announced in October its plans to build an "AI-optimized data center" that would be the largest yet in the UAE.
• Saudi Arabia, where Microsoft is also investing heavily, is planning an AI project to rival the UAE's effort.

What to watch: President-elect Trump's ties with Gulf states run deep, as he has continued striking business deals and engaging in diplomacy after his first term ended.

• Trump is likely to continue fostering U.S.-UAE relations after he takes office.
• But his administration will have to balance that approach with limiting China's access to sensitive U.S. technology, another area Trump has historically prioritized.