AWS and Azure in the Spotlight for Providing AI Services to China

An investigative report from Reuters has thrust cloud service giants, Amazon’s AWS and Microsoft’s Azure, into the limelight for facilitating artificial intelligence (AI) services to China. The report delved into approximately 50 tender documents from the past year, uncovering that around 11 Chinese entities attained access to U.S. chips and AI software through cloud services.

The U.S. government has imposed stringent restrictions on exporting high-end chips and AI technology to China, apprehensive of potential military applications. Reuters has previously highlighted similar instances of circumventing these restrictions.

While the U.S. law prohibits exporting software and technology commodities, a glaring loophole exists for their sale through the cloud. Chinese entities have deftly exploited this loophole by procuring advanced technology from the U.S. via Chinese intermediaries instead of directly purchasing from AWS or Azure.

Intriguingly, AWS was named as the cloud service provider in at least four of the tenders. An AWS spokesperson emphasized, “AWS complies with all applicable US laws, including trade laws, regarding the provision of AWS services inside and outside of China.”

Chinese Entities Ingeniously Navigate Restrictions

The U.S. has explicitly prohibited the export of Nvidia’s high-end chips, critical for powering large language models (LLMs) like OpenAI’s ChatGPT. One tender from March detailed how Shenzhen University paid $27,996 for an AWS account to access cloud servers supported by Nvidia’s A100 and H100 chips. This service was procured through an intermediary company, Yunda Technology Ltd Co. Another tender revealed Sichuan University’s purchase of 40 million Microsoft Azure OpenAI tokens to develop a generative AI platform.

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Reports indicate that Chinese companies resort to American service providers due to the inadequacy of computing power among domestic players like Alibaba’s Alicloud to run generative AI models. Thus, China stands as one of the largest markets for technological products, with firms fiercely competing to capture a substantial slice of this vast demand. According to IDC, AWS ranks as the sixth-largest cloud computing service provider in China.

Cognizant of this loophole, the U.S. government is actively seeking to tighten regulations to preclude access to AI models through the cloud. Recently, a bill was introduced in April to restrict chip access via cloud services. The enforcement of such measures could significantly impact AWS and Azure.

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Revelations on AWS and Azure’s Role in Providing AI Services to China

Chinese Entities Ingeniously Navigate Restrictions

Choosing Between MSFT and AMZN