AI chip smuggling 'gets more airtime than it should', White House official says

Policies in place to prevent diffusion of AI technology, says tech policy chief Michael Kratsios

White House OSTP director Michael Kratsios defended recent moves by President Trump to nullify several AI export controls put in place by former president Joe Biden. Photo: CSIS

The idea of high-performance AI chips being smuggled into potentially nefarious hands gets more attention than it should, a White House official has said.

Michael Kratsios, who serves as director for the Trump administration's Office of Science and Technology Policy, said on Wednesday that there are a lot of misconceptions and misguided fears about the “physical diffusion” of artificial intelligence technology developed by the US.

“We're not talking about like a bag of diamonds or something,” he said during a discussion at the Centre for Strategic and International Studies think tank about Mr Trump's recently announced AI Action Plan.

Some politicians have expressed concerns about the potential for recently announced US AI partnerships overseas to be exploited by countries like China to try to acquire powerful American-made technology.

“These are like massive racks that are tonnes in weight and you're not going to put it on a forklift or back it into a truck, or something," he explained, adding that the idea of chip smuggling "probably gets more airtime than it should."

Mr Kratsios also said the hypothetical scenario of the US partnerships with other countries leading to the misuse of data centres by countries like China for “training runs” to access the centres was overblown.

“What you're most worried about is large-scale runs that are for training sophisticated models and those are actually pretty easy to flag,” he said, adding that the US will make sure to implement what's known in IT circles as Know Your Customer policies to prevent bad actors from gaining access to data centres powered by US technology.

OSTP director Michael Kratsios, left, applauds after US President Donald Trump signed executive orders related to artificial intelligence. Reuters

Mr Kratsios said that Mr Trump's predecessor, Joe Biden, put too many chip export restrictions on allies, and that the export of US technology to countries with peaceful AI aspirations was critical to an overall AI strategy.

During Mr Trump's visit to the Gulf in May, he announced the US-UAE AI Acceleration Partnership framework that will eventually lead to the construction of a 5GW UAE-US AI Campus in Abu Dhabi.

“The [Biden administration] limits made no sense at all,” he said, referring to President Biden's policies aimed at limiting the powerful CPUs and GPUs available to certain countries.

Those policies were largely aimed at preventing the diffusion of US technology to China.

It proved controversial, with companies like Microsoft and Nvidia claiming the policies hurt US efforts more than helping. Some US AI companies like Anthropic, however, have sought to keep the export controls.

“In some cases, smugglers have employed creative methods to circumvent export controls, including hiding processors in prosthetic baby bumps and packing GPUs [graphics processing units] alongside live lobsters,” read an April policy letter from Anthropic.

Five Democratic Senators sent this letter to US Commerce Secretary Howard Lutnick, criticising the Trump Administration's decision to allow for the sale of Nvidia's H20 GPU to China.

That letter later came under criticism over what some called the oversimplification of how AI data centres work.

Regardless, in keeping with that theme of reversing the Biden export policy, the Trump White House recently announced plans that would allow for Nvidia to resume sales of its H20 graphics processing unit to China.

That decision, however, has come under criticism from several technology analysts and politicians. A group of Democratic senators this week sent a letter to Commerce Secretary Howard Lutnick urging him to reverse course.

At the CSIS event, Mr Kratsios said the concerns from Democratic senators were oversimplified, adding that the H20 was designed to comply with US concerns about giving China too much computing power, among other things.

“It's not a free-for-all sale,” he said, referring to White House's H20 announcement.

“Any sale that Nvidia wants to make to China is one that's going to require an export licence.”

Mr Kratsios added that the Commerce Department's Bureau of Industry and Security would be evaluating each of those licence applications and “weight the costs” before giving Nvidia approval.