Stephen Nellis
(Reuters) – Microsoft President Brad Smith said the company's high-profile deal with UAE-backed AI company G42 could eventually include the transfer of advanced chips and tools. A senior Republican lawmaker warned that the move could have national security implications.
In an interview with Reuters this week, Smith said the sale deal, many of the details of which are reported here for the first time, will move into a second phase that will involve the export of key components of the AI technology, including model weighting and crowns. He said it was possible. His AI system is a gem that determines the power of the AI system. Smith said there is no firm timeline for phase two.
U.S. officials say AI systems could pose national security risks, including facilitating the production of chemical, biological and nuclear weapons. In October, the Biden administration asked the largest manufacturers of AI systems to share their details with the U.S. government.
The deal requires approval from the U.S. Department of Commerce to proceed. Microsoft executives said the deal includes safeguards to protect Microsoft's technology and prevent Chinese companies from using it to train AI systems.
But these measures have not been made public, and some U.S. lawmakers have questioned whether they are appropriate.
Some lawmakers have expressed concern that negotiations between the two private companies over terms and safeguards for the transfer of U.S. technology are being held behind closed doors.
“Despite the significant national security implications, Congress still has not received a comprehensive briefing on this deal from the executive branch,” Michael McCaul, the Republican chairman of the House Foreign Affairs Committee, told Reuters. “I am concerned,'' he said. Given the (Chinese Communist Party's) interests in the UAE, there are no adequate guardrails in place to protect sensitive U.S.-derived technology from Chinese espionage. ”
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The Commerce Department already requires notification and, in some jurisdictions, an export license for AI chips to be exported overseas, but the Microsoft-G42 deal highlights loopholes in U.S. law as regulators rush to keep up with a rapidly evolving technology.
For example, there are currently no regulations restricting the export of AI models, but McCaul and a bipartisan group of lawmakers introduced a bill this week that would give U.S. authorities clearer powers.
Microsoft executives said the company welcomes discussions on a new legal framework to regulate the transfer of AI technology, and that the deal with G42 requires the UAE company to follow evolving U.S. regulations.
“Fundamentally, our focus is on ensuring U.S. technology can move safely around the world,” Smith said.
Beyond the United Arab Emirates
When Microsoft and G42 announced the deal last month, it was touted as bringing G42 closer to the United States and broadening American technological influence in a strategic competition with China. Microsoft will invest $1.5 billion in G42, and Microsoft President Smith will become a director of the company.
The companies did not provide details about what technology would be transferred to the UAE or other countries, or what specific security measures would be in place, some of which were reported for the first time.
The broad aim of the deal is for Microsoft and G42 to work together to bring AI technology to areas where neither can do it effectively on their own, with an early example being a deal the two companies announced on Wednesday in Kenya.
The Microsoft-G42 contract requires the companies to provide security guarantees to their respective home governments, but there is no direct agreement between the U.S. and the UAE governing the transfer of sensitive technology. Microsoft executives said the two companies could explore transferring technology to other markets outside the UAE, such as Turkey or Egypt.
Smith explained the details of the agreement, including how to protect what are known as the AI's “model weights,” which are key parts of the AI model that define how it responds to questions and prompts. He said many have not yet been packed. These weights are obtained by training AI models using large amounts of data, often at great expense.
Model weights cannot currently be encrypted in use, and Smith estimates that any promising technical approach to doing so is at least a year away.
Smith said that to protect its technology, Microsoft is physically separating parts of its data centers where AI chips and model weights are stored and restricting physical access. He said he is considering several alternatives, including:
“I think by the time we're done, we'll end up with a regulatory regime and a trade export control approach that applies broadly, not just to Microsoft and the G42,” Smith said.
Under its contract with Microsoft, G42 follows “know your customer” rules to determine who uses Microsoft's technology and does not allow Chinese companies to use its AI models for training, Microsoft executives said. U.S. regulators have proposed similar rules, but they have not yet been enacted.
“We have made a strategic commercial decision to partner with a U.S. company on advanced technology, and we are very clear about the fact that this requires us to comply with partner and government regulatory requirements. 'or export control regulations,' Talal Al Qaisi, G42's executive in charge of AI-related partnerships, told Reuters.
Under the agreement, Microsoft will be able to impose financial penalties on G42 and enforce those penalties in the London Court of Arbitration, Microsoft said. This means that Microsoft will not be forced to work through the UAE legal system to ensure that G42 complies with its obligations and will have its assets seized in a number of countries if G42 is found to be in breach of the agreement. Microsoft said that means it could be used.
It is unclear how U.S. Commerce Secretary Gina Raimondo will allow the deal to move forward. Mr. Smith said the provision was “unofficial” and that “this Commerce Secretary could very well approve or reject something.”
A Commerce Department spokesperson said in a statement that any technology transfer is subject to export controls, including “currently in place licensing requirements” and “regulations that may be introduced in the future” for AI chips.
(Reporting by Stephen Nellis in San Francisco; Editing by Ken Lee, Chris Sanders and Claudia Parsons)
