How ByteDance Could Obtain Nvidia’s Most Advanced AI Chips Despite US Restrictions on China

Chinese tech giant ByteDance, the parent company of popular social media platform TikTok, has found a way to access Nvidia’s most powerful artificial intelligence (AI) chips for its US operations, despite strict US export controls aimed at preventing advanced technology from going to China. ByteDance is reportedly leasing the coveted chips from US cloud computing provider Oracle, according to sources familiar with the matter who spoke to The Information.

The US government banned the sale of cutting-edge AI chips directly to China in 2022 due to national security concerns. However, ByteDance discovered it could still utilise the chips by renting them from US-based providers like Oracle and using them on American soil. This loophole in the sanctions rules has also attracted interest from other major Chinese tech companies.

Cloud providers Alibaba and Tencent have reportedly approached Nvidia about obtaining its high-end chips for data centres they would operate within the United States. Additionally, Chinese state-owned telecom firm China Telecom has sought similar leasing arrangements with unnamed US cloud companies.

While not technically illegal, these practices go against the spirit of the US chip restrictions, which aim to slow China’s AI development and prevent the technology from being used for military or surveillance purposes by Beijing. However, the current rules do not explicitly prohibit Chinese companies from accessing the chips if they are housed and used within the United States.

Regulators face challenges in closing loopholes as some smaller American cloud providers turned down offers to rent servers with Nvidia’s advanced chips to ByteDance and China Telecom, feeling it violated the intent of the regulations. However, Oracle apparently decided the opportunity for revenue outweighed such concerns.

The US Commerce Department proposed a rule earlier this year that would require US cloud companies to verify foreign customers’ identities and report if they were training AI models that could be used for malicious purposes. However, the rule faced opposition from cloud providers who argued the compliance burden would outweigh any benefits, and it remains in limbo.

Even if this particular loophole is closed, Chinese tech giants like Alibaba and Tencent with their own US data centres could still potentially purchase and use the restricted chips, further complicating the situation for regulators.