Did Big Tech just outfox the China hawks?

Politico

5 days ago

One of the most dizzying pivots in American policy toward China happened just last week, when two chipmakers — Nvidia and AMD — said that Donald Trump's White House had effectively given its blessing to let them sell high-end artificial intelligence chips to China.
Just in April, the White House had banned sales of Nvidia's H20 and AMD's MI308 chips to China. Recent administrations spent years trying to contain China's ambitions in tech — and particularly in AI. My colleague Gabby Miller called it 'policy whiplash' in her Morning Tech newsletter on Thursday.
China hawks in Congress are up in arms, worried that the H20 compute power could enable the country to develop state-of-the-art AI models. Republican Rep. John Moolenaar (R-Mich), chair of the House China Committee, sent a letter to Commerce Secretary Howard Lutnick on Friday insisting on a briefing about the decision. Democratic ranking member Raja Krishnamoorthi said the move would 'hand our foreign adversaries our most advanced technologies.'
(In fairness, these are not the most advanced technologies — Nvidia's highest-end AI chips are still illegal to export to China.)
What's really going on here? Is this just Trump being strategically unpredictable in the middle of a stuck trade negotiation with China? Or is he taking the industry's side against the national-security community?
Possibly either. Or both. But to longtime observers, this is also an attempt to take another position in a years-long argument: If countries are going to develop AI, the thinking goes, it's far better to have it built on American tech.
Proponents of the H20 exports contend that they further national security by keeping the world dependent on the U.S.'s AI hardware, as well as fortifying its market power. During a CNBC interview on July 15, Lutnick argued that Nvidia's sales get China's developers 'addicted to the American technology stack.'
This is also the argument Nvidia CEO Jensen Huang has been making, according to the New York Times.
Nvidia told DFD in a statement, 'America wins when the world builds on the U.S. technology stack. The Government made the best decision for America, promoting U.S. technology leadership, economic growth, and national security.' AMD did not respond to an inquiry.
Patrick Moorhead, a former VP at AMD, said a strong market position is important to keeping Chinese competitors at bay. 'Any dollar that's not going to Nvidia is going to Huawei,' he told DFD.
Part of the policy tension is simply over risk tolerance, Moorhead said. The national-security community — especially military and defense officials — typically 'just want to take all risk off the table,' he said.
Businesses, of course, thrive on a measure of risk — especially when they see big gains at stake. This was clearly in evidence when Trump brokered deals to send tens of thousands of high-end chips to Gulf countries in May, over objections that it would open the door to chip smuggling.
'The White House seems to be prioritizing the economic gains [...] and they have a philosophy about why that won't create challenges on the national security side,' said Michael Horowitz, a deputy assistant secretary of defense under Biden who had concerns that the exports could be harmful in the long term. 'Given the way that China aggressively harvests American technology to improve its military, there are reasons to be nervous.'
A White House official told DFD on background that the administration sees its application process for selling chips like H20, which Biden did not restrict, as creating a middle path that promotes the industry while addressing serious national security concerns.
In the classic Washington game of 'who's winning,' it looks like this round goes to the chipmakers over the hawks. AI and chip companies have been 'been pretty good at convincing the president to take some measure of risk,' said Moorehead.
Nvidia CEO Jensen Huang seems to have masterminded this particular about-face. He's been in regular contact with White House allies to protest against export controls, and reportedly convinced Trump to change course on Nvidia's chip sales to China in early July.
National security wonks aren't so sure this will work to keep China dependent on America's tech stack. China has been investing more than any other geographic region on building up domestic manufacturing capabilities since 2023. 'Even if China has access to U.S. chips and architectures, they're strategically aware enough to know that they shouldn't rely on a competitor for a technology this vital,' Janet Egan, a senior fellow at the Center for a New American Security, told DFD.
'At the end of the day, Chinese firms are going to be actively trying to create alternative ecosystems regardless,' she said.
The industry's initial victories on export controls aren't set in stone. Since Trump set the H20 restrictions in the first place, only to revoke them, he could easily pull another 180 in the future. In fact, national security concerns are reportedly holding up UAE chip deals.
Plus, the industry-hawk dichotomy can be a bit reductive when it comes to this debate. Chris Miller, a Tufts University historian who wrote the book 'Chip War,' told DFD that chip exports can help or hurt different parts of the tech industry — Anthropic notably called for strong controls on advanced microchips in April.
'Obviously chip companies, at least in the short run, benefit from selling more chips, but then AI companies in the U.S. probably lose out by having stronger Chinese competitors,' he said.
In a storyline as complex as chips, China and AI, perhaps it's more accurate to look at Big Tech as a collection of different industries, whose interests don't always align. On the question of the new H20 exports, Miller said: 'It depends on which industry you're talking about — you get different answers.'
China-linked hackers breach Sharepoint
China-backed groups hacked Microsoft's SharePoint service, the American tech giant said Tuesday, as POLITICO's John Sakellariadis and Dana Nickel report. They add the U.S. has yet to name a culprit.
The hack hit some 100 targets, which began to notice the security breach last week. Microsoft named three groups based in China — Linen Typhoon, Violet Typhoon and Storm-2603 — as being responsible for the hack. It added that Linen Typhoon and Violet Typhoon are Chinese state actors. Internet researchers told POLITICO that the cyberattack exploited a SharePoint flaw to remotely access servers belonging to dozens of organizations around the world.
Microsoft said in a statement that it was 'coordinating closely with [the Cybersecurity and Infrastructure Security Agency], [Department of Defense] Cyber Defense Command, and key cybersecurity partners around the world throughout our response.' The company's threat intelligence team also recommended that SharePoint customers install its latest security updates and antivirus programs.
A U.S. official told POLITICO that government investigators suspect the hackers were able to infiltrate four to five federal agencies. Officials told John and Dana they had not yet determined how or whether China was involved in the attack.
The Chinese embassy in Washington did not respond to POLITICO's inquiries.
Congress wants answers on AI.gov
Senate Democrats are pressing the Trump administration on the development of an AI chatbot known as AI.gov for federal employees.
POLITICO's Morning Tech team obtained a letter that 15 Senate Democrats sent to the Department of Government Efficiency initiative and the General Services Administration inquiring about AI.gov. The letter, helmed by Sen. Brian Schatz (D-Hawaii), requests information on the application's use cases, data privacy safeguards and protections against bias.
'Poorly planned AI deployments can risk disrupting workflows and fostering distrust, especially when workers are not adequately trained or consulted,' the letter reads.
The outlet 404 Media was the first to report on the government's AI.gov efforts in June. Based on information from GitHub and audio from internal meetings, 404 Media found that federal officials had considered incorporating AI coding agents and an analytics feature to track AI use across government teams.
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