U.S. Government: *pounds table* “We are going to curb China’s chip industry!”

Microsoft & Google: “Hold our beers…"

In a turn of very recent events (like this morning recent), both Google and Microsoft have decided to be the rebellious little “shat’s” we talked about this morning. 

(Source: Giphy) 

You see, despite the Biden administration’s stern face and tough talk on restricting China’s chip industry, reports have surfaced that Google and Microsoft are, well, basically saying “Scr#w you ,U.S. Government”. How? By offering Chinese companies access to their high powered Nvidia chips through data centers located outside of China. 

(Source: Seeking Alpha) 

Can someone say, “Big Tech rebels and a sneaky link - Big Tech rebels and a sneaky link?” (For those who’ve seen the stupid video, you know what I’m talking about). 

(Source: CGWall) 

For instance, Microsoft is reportedly renting out server space equipped with Nvidia’s A100 and H100 chips to Chinese clients from data centers outside China. And Google? They’re letting Chinese customers tap into their servers based beyond the Great Wall of China as well. 

Now of course, both companies are confident they’re playing by the rules, but this is no doubt a sly move that feels a little too close to the line in the sand. 

(Source: Hindu Times) 

However, it’s not just Google and Microsoft that “stuck” it to Capitol Hill’s crackdown talk today. The market itself decided to say it’s piece on the China restrictions by vomiting on every bullish investor as the S&P 500 plunged -1.02% on the day, while the Nasdaq tanked nearly -3% on the day. 

Which makes me happy, because the S&P 500 had me feeling like I legit jinxed the market with my “It’s been 512 days since the S&P 500 fell below 2%” comment this morning. So in short, it was way to close of a call. And of all the days I say that, and the market tanks? I might as well write under the pseudonym “Jim Cramer” from now on. 

(Source: Giphy) 

Alright, alright all jokes aside, the market clearly didn’t like the “severe” chip restriction talk at all, and neither did Google, Microsoft, or Nvidia (which ironically being the stock stuck in the middle of this fiasco, took a nosedive north of -6% today). But what does our trusty government have to say about this slap in the face? 

Well as one would expect, the Biden administration isn’t exactly thrilled about it. 

(Source: CNBC)

In fact, they’re gearing up to slam the brakes on it. The U.S. Commerce Secretary, Gina Raimondo, has been vocal about closing any loopholes that let foreign entities, especially from China, access U.S. cloud services to train AI models. “We can't have non-state actors or China or folks who we don't want accessing our cloud to train their models,” Raimondo told Reuters.

(Source: The Boston Globe) 

Keep in mind, earlier this year the U.S. government proposed requiring cloud companies to verify if any sneaky foreign entities are using U.S. data centers for AI training. Think border control, but for data.

(Source: Trend Force) 

Which should kind of tell you something, because if the current administration can’t control the 1.7 million+ of immigrants that have crossed the border, how in the actual h$ll are they going to patrol this? Spoiler: They are obviously failing at both. 

Now, of course they have the ability to patrol it, it’s just a matter of “IF” they’ll pull all their resources to do so. But even still, if they do go full on SWAT team with it, then that will raise even more problems beyond the topic we are already discussing. Which is why, the bigger question that’s arising is if the current move by Google and Microsoft is justified? 

(Source: Giphy) 

Well it all depends on who you ask. Some may say it’s unpatriotic that they are going behind the government's back to ensure our biggest foreign threat keeps pace in the AI race…

And others, well, they’ll admire the sly move, saying these two companies didn’t break the rules, they just bent them creatively. 

(Source: Giphy) 

But regardless of everyone’s personal “think so’s” on the matter, this high-stakes dilemma is far from over. For now, Microsoft and Google have painted somewhat of a target on their back (as if they didn’t have a big enough one already). So I’m sure the next time we cover this story, it’ll include even more twists and turns. 

In the meantime, stay tuned, because things are getting juicier and juicer I tell ya! 

Stocks.News holds positions in Microsoft and Google as mentioned in the article.