2025 AI Diffusion Export Controls – Microsoft Regulatory Capture, Oracle Tears, Impacts Quantified, Model Restrictions – SemiAnalysis

The US government lobbed the largest salvo in the new technology cold war with its new Framework for Artificial Intelligence Diffusion. These new export restrictions are completely unprecedented in scope and scale, with many calling the efforts overzealous or misguided. The regulation at its core is targeted at preventing China from accessing AI compute to build frontier models.

The prevailing rationale within the US government is that AI progress has become so rapid, that access to compute to build and improve these models over the next few years will decide the fate of the next global order for decades to come. In short, the government believes that AI with determine whether US hegemony persists or if it is ceded to China. If AI regulations are justified, but if AI takes longer to make any meaningful impact on the world economy, then these regulations are shortsighted and will harm American competitiveness in the long term.

While the semiconductor controls still have some loopholes, the AI chip controls were much more Swiss Cheese. Up until now, while China has been limited from accessing AI compute, that has only been on paper, and it has been circumvented through several methods. In reality, restricted Nvidia GPUs were simply re-exported by bad actors to China from unrestricted countries with a meaningful number of H100s available on various clouds and marketplaces in China. Additionally, over a million China specific accelerators that skirt the line on current regulations have been legally shipped such as the Nvidia H20, B20, AMD MI308X, and Intel Gaudi HL-328 + HL-388.

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