A recent investigative report by Reuters has cast a glaring spotlight on two major cloud service giants, Amazon’s AWS and Microsoft’s Azure, for their pivotal roles in providing artificial intelligence (AI) services to Chinese entities. The probing analysis scrutinized nearly 50 tender documents over the past year, revealing that approximately 11 Chinese establishments have availed themselves of U.S. chips and AI software utilizing cloud services.
The United States has enforced strict restrictions on exporting sophisticated high-end chips and AI technology to China, citing concerns over potential military applications. This report echoes earlier findings by Reuters highlighting similar maneuvers to circumvent these limitations.
The U.S. government, albeit restricting the export of software and technology as commodities, inadvertently left a loophole for their sale through cloud platforms. Chinese entities deftly exploited this gap by securing access to cutting-edge technology from the U.S. through Chinese intermediaries rather than directly procuring them from AWS or Azure.
Fascinatingly, at least four tenders explicitly identified AWS as the cloud services provider. In response, an AWS spokesperson reiterated their commitment to full compliance with U.S. laws, including trade regulations, governing the provision of AWS services both within and outside China.
Ingenious Routes: Chinese Firms Navigate Export Restrictions
The export embargo specifically includes Nvidia’s premium high-end chips crucial for powering large language models (LLMs) like OpenAI’s ChatGPT. Notably, a tender document from March disclosed that Shenzhen University paid $27,996 for an AWS account to access cloud servers equipped with Nvidia’s A100 and H100 chips. This service was acquired through an intermediary known as Yunda Technology Ltd. Co. Another tender showcased Sichuan University’s procurement of 40 million Microsoft Azure OpenAI tokens to construct a generative AI platform.
Evidently, Chinese firms are turning to American service providers due to the inadequate computing power of domestic players such as Alibaba’s Alicloud for running generative AI models. China undeniably stands as a colossal market for technology products, with companies fiercely competing to capture a significant share of this burgeoning demand. According to research firm IDC, AWS holds the position of the sixth-largest cloud computing service provider in China.
The U.S. authorities are cognizant of this regulatory gap and are actively working to bolster restrictions to block access to AI models via cloud services. A bill introduced in April aims to curb chip access through cloud platforms, highlighting a looming regulatory crackdown that could significantly impact AWS and Azure.
Choosing the Champion: Microsoft or Amazon?
Utilizing the TipRanks Stock Comparison tool, a head-to-head analysis was conducted on Amazon.com and Microsoft. The findings are compelling. Both tech behemoths boast a “Strong Buy” consensus rating from Wall Street analysts and stellar scores exceeding eight, indicating a high likelihood of surpassing market expectations.
Disclosures: Still the plethora of figures, laws, and regulations dictate the reality of the business.