Chinese Tech Giants Shift AI Training Overseas Amid Chip Restrictions

Chinese tech firms train AI models abroad to bypass chip restrictions.

Major Chinese tech firms have found ways to circumvent restrictions on the supply of Nvidia’s flagship chips. They are training their AI models abroad, reports the Financial Times, citing sources.

Alibaba and ByteDance are among the companies turning to data centers in Southeast Asia for assistance.

According to the report, following the imposition of chip supply restrictions in April, there has been a steady increase in AI model training at offshore locations. These data centers are not managed by Chinese firms.

DeepSeek is not among these companies, as it managed to stockpile a significant number of Nvidia chips before the export bans were implemented. The startup also collaborates with domestic semiconductor manufacturers, led by Huawei, to optimize and develop the next generation of Chinese AI chips.

Pentagon’s Opposition

The Pentagon has urged the US Congress to add Alibaba, Baidu, and BYD to the list of companies aiding the Chinese military, reports Bloomberg, citing a letter.

On October 7, Deputy Secretary of Defense Steven Feinberg sent the document to the heads of the House and Senate Armed Services Committees.

According to him, the mentioned three companies, along with five others—Eoptolink Technology, Hua Hong Semiconductor, RoboSense Technology, WuXi AppTec, and Zhongji Innolight—deserve inclusion in the 1260H list. This list comprises firms associated with the Chinese military and operating within the United States.

“In reviewing the latest available information, the department identified eight organizations that, under the law, should be categorized as ‘Chinese military companies’ and included in the 1260H list,” Feinberg wrote in the letter.

On October 30, a summit between Donald Trump and Xi Jinping took place. During the meeting, the leaders agreed on a package of measures, including tariff reductions and commitments to suspend certain export control initiatives.

Alibaba representatives stated that there is “no basis” for its inclusion in 1260H:

“[The company] is not a Chinese military company and does not engage in any military-civil fusion strategy.”

The inclusion of several well-known Chinese companies in the list in January led to a sell-off of their shares. The incident affected Tencent and Contemporary Amperex Technology, which manufactures batteries for Tesla. In total, the document lists over 130 organizations, including airlines, construction firms, computer equipment manufacturers, and others.

Inclusion in 1260H has several consequences for a company. These include restrictions on contracting with the US Department of Defense, potential risk of being added to other lists, reputational damage, and increased compliance costs.

By 2027, the level of national artificial intelligence implementation in China is expected to reach 70%, and by 2030—90%. These targets are outlined in a new government directive.