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Microsoft Corp. President Brad Smith is urging the Trump administration to rethink new regulations that would cap the export of artificial intelligence chips to “strategically vital markets” including Israel, Saudi Arabia and the United Arab Emirates.

Introduced by the Biden administration, the so-called AI diffusion rule puts several nations in the second tier of a three-tier category that curbs the export of chips used in data centers to train AI models. Smith said the policy could prompt those countries to turn to China for advanced chips. 

“Left unchanged, the Biden rule will give China a strategic advantage in spreading over time its own AI technology, echoing its rapid ascent in 5G telecommunications a decade ago,” Smith wrote in a corporate blog post on Thursday.   

President Donald Trump and his team have been drawing up tougher versions of US semiconductor curbs and pressuring key allies to escalate their restrictions on China’s chip industry — a sign that the White House is keen to expand on Biden-era efforts to limit Beijing’s technological prowess.

Trump also on Thursday announced an additional 10% tariff on Chinese imports.

The AI diffusion rule, imposed during President Joe Biden’s final week in office, divided the world into three tiers of countries and set maximum thresholds for the AI computing power that can be shipped to each. It also established mechanisms for companies to validate the security of their projects and access higher compute limits.

The rule, which will have an impact on data center development everywhere from Southeast Asia to the Middle East, drew harsh rebuke from companies including Nvidia Corp., the world’s leading maker of advanced AI chips. Nvidia Chief Executive Officer Jensen Huang expressed optimism that the Trump administration would opt for a lighter regulatory touch.

Microsoft runs or is building data centers in several countries subject to caps on chips exports, including the UAE, where the US tech giant is developing AI data centers in partnership with G42. 

--With assistance from Mackenzie Hawkins.

(Updates with more context, starting in the fourth paragraph.)

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