Did Donald Trump just give China a major advantage on AI?

Australia Broadcast Center

4 days ago

Last month, the Trump administration quietly reversed one of its own policies by lifting a ban on US tech giant Nvidia's H20 microchip exports to China.
For anyone who has followed Donald Trump's erratic record on trade, another U-turn might not sound like a notable development.
But this time, the stakes are much higher because these microchips are critical to powering the next generation of artificial intelligence.
Whichever country dominates microchip production will likely lead the global AI race, with massive implications for military strategy and economic output.
For nearly three years, the US has tried to keep these powerful chips out of China's hands.
Now, by reopening the door, has Mr Trump handed Beijing a major advantage on AI?
We spoke to three experts to explain how we got here.
Back in April, the Trump administration banned H20 microchip exports to China, toughening restrictions put in place by the Biden administration. It has since reversed that decision.
According to Jason Van Der Schyff, a fellow at Australian Strategic Policy Institute's technology and security program, this backflip may be in response to the booming black market demand for high-powered US chips in China.
"Over a billion dollars worth of restricted chips were smuggled into China in just a few months," he said.
"The reversal may be a pivot by the administration, recognising if you don't offer a legal channel for the slightly degraded chips, buyers will simply go around you."
Professor Shahriar Akter, who specialises in the study of advanced analytics and AI at the University of Wollongong said this move seems to follow "a philosophy in Silicon Valley that if you sell more" it will pour more back into "your research and development".
Associate Professor in Information Systems at Curtin University, Mohammad Hossain, suggested the Trump administration is trying to kill two birds with one stone.
The US is trying to maintain leverage in a broader geopolitical trade-off involving China's critical exports, rare earth elements, while "keeping China dependent on US technology", he said.
Nvidia is the tech giant behind these highly sought after microchips and it is led by CEO Jensen Huang who is the ninth-richest man in the world.
The H20 is a step-down from Nvidia's top-tier chips (H100 and B200) and was specifically designed to comply with US export restrictions while catering to the Chinese market.
"Basically, [H100 and B200 chips] can do things much faster than the H20," Mr Van Der Schyff said.
"If we consider how quickly AI is moving any impediment that could be brought to time more than anything is going to maintain that US strategic advantage."
While the H20 is less powerful, Mr Van Der Schyff warns that "these aren't toys … even slightly downgraded chips still enable model training at scale".
"If you're concerned about national security, letting an adversary access chips that are only one rung down the ladder still poses a strategic risk."
While the US hopes to stall China's progress in artificial intelligence, experts warn this strategy may have the opposite effect.
China's push to dominate AI is already underway and restricting exports to only H20 chips incentivises them to accelerate domestic developments.
"At present in the world, 50 per cent of AI researchers are being produced by China alone," Dr Akter said.
Chinese tech giants like Huawei and Biren Technology have been ramping up their own AI accelerators.
"Huawei's chips are already being deployed in major training clusters," Mr Van Der Schyff said.
Still, China's domestic developments trail behind industry leaders like Taiwan's TSMC and South Korea's Samsung when it comes to cutting-edge manufacturing.
"There isn't necessarily a danger that China catches up overnight but these restrictions do however give Beijing a clear incentive to sort of go all in on industrial policy for their own semiconductors to accelerate domestic progress," Mr Van Der Schyff said.
"We've seen this play out previously with 5G and also with aviation."
All three experts cautioned that it's difficult to gauge China's true AI capabilities.
"Given the closed nature of China's systems and their propensity to not always tell us the truth", it's unclear how much China's artificial intelligence has developed, Mr Van Der Schyff said.
Dr Akter used an analogy to explain the uncertainty: "There are two types of AI technologies", one is called glass box and the other is called black box.
"Glass box technology is basically explainable AI, which is open source and we can explain where data is coming from and how it is being used to develop AI models and what would be the outcome."
Whereas, black box technology is the opposite, we cannot trace back to the source of the data and we cannot tell what models have been used.
That opacity makes it difficult for the rest of the world to assess whether Beijing is playing catch-up or quietly pulling ahead.
The country that has the upper hand in microchip production will likely lead the global AI race and that has significant repercussions, experts said.
"The country that dominates compute will dominate AI, and AI will shape everything from military planning to economic productivity."