US sets new rule that could spur AI chip shipments to the Middle East

By Karen Freifeld

WASHINGTON (Reuters) -The U.S. Commerce Department on Monday unveiled a rule that could ease shipments of artificial intelligence chips to data centers in the Middle East.

Since October 2023, U.S. exporters have been required to obtain licenses before shipping advanced chips to parts of the Middle East and Central Asia.

Under the new rule, data centers will be able to apply for Validated End User status that will allow them to receive chips under a general authorization, rather than requiring their U.S. suppliers to obtain individual licenses to ship to them.

The U.S. will work with foreign data centers that apply for the Validated End User program as well as host governments to ensure the safety and security of the technology, a U.S. official said.

The move comes amid growing concerns in Washington that the Middle East could become a conduit for China to obtain advanced American chips that are barred from being shipped directly to China.

G42, a UAE-based AI company with historic ties to China, has been a focus of those concerns. In April, Microsoft (NASDAQ:) announced it would invest $1.5 billion in the company, and that it planned to provide G42 with chips and model weights, sophisticated data that improves an AI model’s ability to emulate human reasoning.

The deal drew scrutiny from China hardliners in Congress, even though G42 said in February it had divested from China and was accepting constraints imposed on it by the United States to work with American companies.

G42, which owns data centers, did not immediately respond to a request for comment.

Data centers which apply for the program will undergo a rigorous review process to make sure safeguards are in place to keep U.S. technology from being diverted or used in ways contrary to national security, the Commerce Department said in a statement.

The agency’s Bureau of Industry and Security “is committed to facilitating international AI development while mitigating risks to U.S. and global security,” Alan Estevez, a Commerce official, said in the statement.