Stephen Nellis
(Reuters) – Microsoft (NASDAQ:) President Brad Smith said the tech company’s high-profile artificial intelligence deal with United Arab Emirates-backed G42 firm could ultimately involve the transfer of sophisticated chips and tools – a move that a senior official warned Republican congressman, could have national security implications.
In an interview with Reuters this week, Smith said the sales agreement, many of the details of which are being published here for the first time, could move into a second phase that would entail the export of critical components of the AI technology, such as model weights, crowns, etc. the crown jewel of artificial intelligence systems that defines their power. Smith said there is no clear timeline for phase two.
US officials have said artificial intelligence systems could pose a threat to national security, for example by facilitating the development of chemical, biological and nuclear weapons. In October, the Biden administration required manufacturers of the world’s largest artificial intelligence systems to share details about them with the US government.
The deal will require approval from the U.S. Commerce Department to move forward. Microsoft executives said the agreement includes guarantees to protect Microsoft technologies and prevent them from being used by Chinese organizations to train artificial intelligence systems.
But the measures have not been made public, and some U.S. lawmakers question their adequacy.
The closed nature of negotiations between two private companies over terms and guarantees for the transfer of American technology has alarmed some lawmakers.
“Despite the significant national security implications, Congress has not yet received comprehensive information from the executive branch about this agreement,” Michael McCaul, the Republican chairman of the House Foreign Relations Committee, told Reuters. “I am concerned there are not the right guardrails to protect sensitive US-origin technologies from Chinese espionage, given the (Chinese Communist Party’s) interests in the UAE.”
The Commerce Department already requires notifications and, in some regions, export licenses to ship artificial intelligence chips overseas. But the Microsoft-G42 deal exposes gaps in U.S. regulations as regulators race to keep pace with rapidly evolving technology.
Currently, for example, there is no regulation restricting the export of artificial intelligence models, although McCaul and a bipartisan group of lawmakers this week advanced legislation that would give U.S. officials more explicit authority to do so.
Microsoft executives said the company welcomes debate over a new legal framework governing the transfer of artificial intelligence technology and that the G42 deal requires the UAE firm to comply with U.S. rules as they develop.
“Essentially, we’re focused on making sure that American technology can move around the world safely and securely,” Smith said.
OUTSIDE UAE
When Microsoft and the G42 announced the deal last month, it was billed as the G42 getting closer to the US and expanding US technological influence amid strategic competition with China. Microsoft is investing $1.5 billion in G42, and Microsoft President Smith is taking a seat on its board of directors.
The companies did not provide details about what technology might be transferred to the UAE or other countries or what specific security measures would be taken. Some of these details are published here for the first time.
The main goal of the deal is for Microsoft and G42 to work together to bring artificial intelligence technology to regions where neither could do it as effectively alone. One of the first examples is a deal in Kenya that the two companies announced on Wednesday.
The Microsoft-G42 deal is an agreement between the two companies that requires each to provide security guarantees to their respective governments, but there is no direct agreement between the US and UAE governing the transfer of sensitive technology. According to Microsoft executives, the two companies may try to take these technologies to other markets outside the UAE, including countries such as Turkey and Egypt.
Smith said many details of the deal still need to be worked out, including how to protect the AI’s so-called “model weights,” which are an important part of an AI model that determines how it responds to questions or prompts. These weights are obtained by training an AI model on huge amounts of data, often at great cost.
Model weights cannot currently be encrypted during use, and Smith estimates that promising technical approaches for this are at least a year away.
Smith said Microsoft has considered several alternative options to protect its technology, including “vault within a vault,” which involves physically separating parts of the data centers that house AI chips and model scales and limiting physical access.
“I suspect that by the time we’re done, we’ll have a regulatory regime or approach to trade export controls that applies broadly, not just to Microsoft and the G42,” Smith said.
Under the agreement with Microsoft, G42 will also follow a “know your customer” rule to determine who uses Microsoft technology and will not allow Chinese firms to use it to train artificial intelligence models, Microsoft executives said. US regulators have proposed a similar rule but have not yet adopted it.
“We have made a strategic business decision to partner with American companies when it comes to cutting-edge technologies. And we are clear that to do this we will need to comply with the requirements of our partners and government regulations. or export control regulations,” Talal Al-Qaissi, the head in charge of AI partnerships at G42, told Reuters.
Under the deal, Microsoft will have the ability to impose financial penalties on G42 and enforce them in arbitration courts in London, Microsoft said. This means Microsoft will not be forced to work through the UAE legal system to ensure G42 meets its obligations, and could seize assets in multiple countries if G42 is found to be in breach of the agreement, Microsoft said.
How exactly US Commerce Secretary Gina Raimondo will allow the deal to move forward remains unclear. Smith said the provisions are “informal” and that “certainly with this Commerce Secretary you can know pretty clearly whether she approves or rejects something.”
In a statement, a Commerce Department spokesman said any technology transfer would be subject to export controls, “including currently in place licensing requirements” for artificial intelligence chips and “potential future controls.”