Biden's new AI export rule sparks backlash from Nvidia, Oracle

On Monday, eight days before President-elect Donald Trump is set to take office, President Joe Biden's administration introduced a new regulatory framework aimed at controlling the export of advanced AI technology, for national security and foreign policy reasons. The new rule received significant criticism from the tech industry.

The framework, titled the Interim Final Rule on Artificial Intelligence Diffusion, specifically focuses on advanced computing chips and closed AI model weights. It aims to prevent the misuse of AI by adversaries and ensure the responsible global spread of this technology, according to the White House.

The rule affects some large global technology companies banks work with, such as Nvidia and Oracle.

Various trade groups and companies, including Nvidia and Oracle, said Monday that the framework is overly broad, poorly timed, lacks industry consultation and will undermine U.S. competitiveness by ceding ground to China in the global AI market.

Order content overview

The order relies on six key mechanisms, according to a statement released by the White House overviewing the order.

First, no restrictions apply to chip sales to 18 key allies and partners, including Taiwan, Japan, the United Kingdom and some of the European Union.

Second, chip orders that contain computational power of up to roughly 1,700 advanced GPUs do not require a license and do not count against national chip caps. The "overwhelming majority of chip orders are in this category," according to the White House.

Third, companies that meet security and trust standards laid out in the order, and that are headquartered in countries closely allied with the U.S., can obtain "universal verified end user," or UVEU, status, allowing them to place up to 7% of their total AI computational capacity outside the U.S.

Fourth, companies that meet the same security requirements but are headquartered in any destination that is not a country of concern can apply for "national verified end user," or NVEU, status, enabling them to purchase computational power equivalent to up to 320,000 advanced GPUs over the next two years.

Fifth, other companies located outside of close allies can purchase the equivalent of up to 50,000 advanced GPUs, capped by country.

Lastly, the regime allows for country-specific arrangements that double the national chip cap in exchange for export control, clean energy and technology security assurances.

Motivation behind the order

The primary motivation behind the order is to protect U.S. national security by preventing advanced AI technologies from falling into the hands of malicious actors and countries of concern, according to the White House. Specific uses of AI the order seeks to prevent are weapons development, cyber warfare and human rights abuses such as mass surveillance.

"This policy will help build a trusted technology ecosystem around the world and allow us to protect against the national security risks associated with AI, while ensuring controls do not stifle innovation or U.S. technological leadership," said Gina Raimondo, the secretary of commerce, in a press release from the Bureau of Industry and Security, which is part of her department.

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National Security Advisor Jake Sullivan said the U.S. has a national security responsibility "to preserve and extend American AI leadership, and to ensure that American AI can benefit people around the world," according to the press release. The rule released Monday helps counter the malicious use of U.S.-made AI technology against the U.S.

Industry reaction

In his statement on the matter, vice president of government affairs at Nvidia, Ned Finkle, presented the Biden administration's rule as a stark contrast to the Trump administration's approach to AI regulation, apparently in a bid to persuade the incoming administration to claw back the lame duck regulation.

The rule is not enforceable until 120 days after it is published in the Federal Register later this week, but it is "already undercutting U.S. interests," Finkle said, adding that the first Trump administration demonstrated that America "wins through innovation, competition and by sharing our technologies with the world" rather than by "retreating behind a wall of government overreach."

"We look forward to a return to policies that strengthen American leadership, bolster our economy and preserve our competitive edge in AI and beyond," Finkle said.

While Nvidia is a major exporter of the hardware chips that run AI models, Oracle is a major exporter of software that does the same.

Last month, when the Biden administration proposed the now-final export controls framework, Ken Glueck, executive vice president at Oracle, blasted the rule, calling it "history's worst government technology idea." On Monday, following the release of the order, Glueck joked, "Had we known then what we know now, we might not have been so circumspect."

The Semiconductor Industry Association, which represents 99% of the U.S. semiconductor industry by revenue and nearly two-thirds of non-U.S. chip firms, made a similar statement expressing concern that the new rule stands to cause "unintended and lasting damage" to the U.S. economy and global competitiveness.

"We're deeply disappointed that a policy shift of this magnitude and impact is being rushed out the door days before a presidential transition and without any meaningful input from industry," said John Neuffer, president of the SIA, in a press release. "The stakes are high, and the timing is fraught."

The order will damage the U.S., according to the think tank Information Technology and Innovation Foundation. "By pressuring other nations to choose between the United States and China, the administration risks alienating key partners and inadvertently strengthening China's position in the global AI ecosystem," said ITIF's Vice President Daniel Castro in a statement.