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AI Attempts at TikTok Allegedly Take Advantage of Loopholes to Utilize Expensive Nvidia Chips

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TikTok’s parent firm, ByteDance, has figured out a means to get around US regulations on cutting-edge AI technology. Since 2022, the US government has prohibited businesses like Nvidia from exporting their most advanced artificial intelligence processors to China. Nevertheless, a shocking article by *The Information* released on Thursday claims that ByteDance is renting these sought-after chips from Oracle on US territory in order to get around this embargo.

The US government’s plan to stop China from using cutting-edge AI technology for commercial, military, or spying purposes includes a restriction on the country’s import of sophisticated semiconductors. The Biden Administration has been especially strict, with bipartisan backing, because of concern about the possible effects of Chinese advances in artificial intelligence. Legislation was approved in April that would have required ByteDance to divest its US business or face a ban; however, ByteDance is suing the US government to delay enforcement and has until early 2019 to reach a settlement.

ByteDance is renting Nvidia’s H100 processors—among the most sophisticated AI chips available—from Oracle’s US-based servers in defiance of these limitations in order to train its AI models. This method takes use of a legal loophole because, although selling these chips to China is illegal in the US, renting them to Chinese businesses within the US is allowed. The integrity and enforcement of US chip export rules are seriously called into question by this arrangement.

The key to this workaround is ByteDance’s Project Texas, an effort that aims to keep TikTok’s US operations independent of its Chinese leadership. On the other hand, ex-ByteDance staffers have called Project Texas “largely cosmetic,” claiming that the US operations continue to work closely with the leadership in Beijing. This calls into question ByteDance’s operational independence claims and increases concerns that AI models developed in the US may be sent back to China, so jeopardizing US national security interests.

There are apparently more Chinese companies taking use of this loophole besides ByteDance. *The Information* suggests that Tencent and Alibaba are investigating comparable approaches to obtain Nvidia’s high-performance CPUs. Since these internet behemoths control their own US-based data centers, unlike ByteDance, it may be harder to oversee their attempts to get around regulations.

It’s interesting to note that not every US cloud provider is prepared to negotiate these murky legal waters. ByteDance and China Telecom received bids to rent servers with Nvidia’s H100 processors, but two smaller American cloud providers turned them down, claiming that the agreements went against the spirit of US chip limitations. On the other hand, Oracle, which was established by Larry Ellison and is currently run by CEO Safra Catz, has chosen to take advantage of this profitable opportunity, indicating a notable difference in opinion within the IT sector.

These tactics seem to be known to the US Commerce Department, which is in charge of enforcing export laws. It put up a proposal earlier this year to compel US cloud providers to confirm the nationality of overseas clients and to alert the US if they were developing AI models that may be utilized in harmful cyberoperations. The majority of cloud providers, however, were against this idea, claiming that the extra regulations would cause unnecessary hardships that exceed the advantages. As a result, this proposed rule—which would address the loophole—remains in legislative purgatory.

The difficulties won’t end even if the US is able to stop this specific exploit. In order to get around the present limitations, Chinese cloud providers such as Tencent and Alibaba may still buy Nvidia’s chips and use them to train AI models in their data centers located in the US. This scenario highlights the intricate relationship between corporate interests and national security, which is a continuous difficulty for US officials.

The fact that ByteDance was able to rent Nvidia’s cutting-edge AI processors from Oracle in the US in spite of strict export prohibitions is a prime example of how profit-driven businesses may take advantage of legal gaps. This circumstance emphasizes the necessity of more complete and strong regulatory frameworks to handle new technical and geopolitical issues. Finding a balance between promoting technical innovation and preserving national security is still a major problem as the US government struggles with these concerns.

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