Microsoft uses its genAI leverage against China — prelude to a tech Cold War?


Back in the 19th century, if the United States or some other military power wanted to bend a smaller country to its will, it would often display its might with a show of force, sending a fearsome display of gunboats just offshore its target. The naval display usually made its point: not a single shell had to be fired for the smaller nation to accede to the demands of the day. 

It was known as gunboat diplomacy.

Today, gunboats no longer rule the world. Tech (and, increasingly, generative AI) do. And Microsoft is now working hand in glove with the federal government to use its considerable genAI might to win what is being called a “tech Cold War” the US is waging against China.

The cooperation has just begun, but it’s already bearing fruit, getting a powerful genAI company based in the United Arab Emirates to cut its ties to China and align with the US. At first blush, it sounds like a win-win: What can possibly be bad about boxing out China from the Middle East, increasing US cooperation with Arab states, and showering profits on a US company for its help?

As it turns out, a lot could wrong. There are significant dangers when the most powerful (and wealthiest) nation on the planet works so closely and secretly with the world leader in AI. The biggest danger: by cooperating so closely with Microsoft, is the US giving up on ever trying to reign in genAI, which researchers have already warned could represent an existential threat to humanity if not regulated properly?

Let’s look at the how the federal government and Microsoft worked together to outmaneuver China and push it out of G42, the most influential AI company in the Middle East, and what that means for emerging plans to regulate genAI tools and platforms.

Boxing China out of the Middle East’s Best AI Company

The immediate target of this round of tech diplomacy is the United Arab Emirates-based G42, which is about as well-connected as any company can be. The New York Times describes it as “a crown jewel for the UAE, which is building an artificial intelligence industry as an alternative to oil income.” It’s controlled by Sheikh Tahnoon bin Zayed, the UAE’s national security adviser, who is among the most powerful members of Abu Dhabi’s royal family, according to Forbes.

The Times says G42 is right in the middle of US efforts to blunt  “China’s ambitions to gain supremacy in the world’s cutting-edge technologies, including artificial intelligence, big data, quantum computing, cloud computing, surveillance infrastructure and genomic research.”

Before the Microsoft deal, the US was especially concerned about G42’s connections to large Chinese tech firms, including telecommunications giant Huawei — which is under US sanctions — and possibly even the Chinese government.

According to the Times, US officials worried G42 was being used to siphon off advanced American technology to Chinese tech firms or to the Chinese government. “Intelligence reports have also warned that G42’s dealings with Chinese firms could be a pipeline to get the genetic data of millions of Americans and others into the hands of the Chinese government,” the Times reported.

Enter Washington’s most powerful officials and the point of its sharp spear, Microsoft. We don’t know exactly what happened behind the scenes. But we do know a deal was “largely orchestrated by the Biden administration to box out China as Washington and Beijing battle over who will exercise technological influence in the Persian Gulf region and beyond,” according to the Times.

US Commerce Secretary Gina Raimondo traveled twice to the Emirates to get the complex agreement done. It gave the US — and Microsoft — exactly what they wanted. Microsoft will invest $1.5 billion in G42, which will sell Microsoft services to train and tune genAI models. G42 will also use Microsoft’s Azure cloud services, and it agreed to a secret security arrangement, of which no details have been made public. 

Chinese technology, including from Huawei and others, will be stripped out of the company. Microsoft President Brad Smith will join G42’s board, and Microsoft will audit the company’s use of its technology. (It wouldn’t be a surprise if that auditing is designed in part to ensure the connection between G42 and Chinese companies and government has been completely severed.)

So, in essence, the US pushed China out of the most influential genAI company in the Middle East and Microsoft now has a significant foothold in a region that will be spending countless billions on AI as it pivots away from an oil economy. In the words of the Times, the deal could become “a model for how US firms leverage their technological leadership in AI to lure countries away from Chinese tech, while reaping huge financial awards.”

What happens next?

The G42 deal has largely flown under the radar, while much more public skirmishes have been fought in the tech Cold War between the US and China — including the battle over banning TikTok in the US and China’s decision to force Apple to pull WhatsApp, Threads and Signal from its Chinese App Store. But TikTok and the others are just a side show. The future is AI, not tweens watching 30-second videos about silly pranks and makeup tips.

That means Microsoft will have an increasingly close relationship with the US government, as will other genAI leaders, including Alphabet, OpenAI, Meta and Amazon. If the US is to thwart China’s AI and tech ambitions, it desperately needs those companies’ cooperation.

But that kind of cooperation comes at a price. The US has a terrible track record in reigning in tech. The Biden administration has been willing to use anti-trust laws to go after Big Tech, even though Congress has been unwilling to act. But it’s hard to imagine the government will continue to wield the Big Stick of anti-trust investigations and lawsuits if, at the same time, it’s asking Microsoft and others to do its bidding against China. 

The first victim of the tech Cold War against China might well be serious government oversight over the dangers of AI.

Generative AI, Government, Microsoft, Regulation, Technology Industry

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