US lawmakers raise a red flag over Microsoft’s $1.5B investment in G42

A group of Republican lawmakers is urging the Biden administration to investigate a $1.5 billion deal between Microsoft and G42 — an AI and data center service provider based in the UAE.

Their concerns center at the transfer of sensitive technology and G42’s historical ties to China, a growing competitor of the US in the field of AI.

Representative Michael McCaul, chair of the House Foreign Affairs Committee, and John Moolenaar, leader of the Select Committee on China, sent a letter to the White House National Security Adviser Jake Sullivan, requesting a briefing on the deal.

“This deal may be one of the most consequential investments by a US technology firm in the Middle East in decades, and as such, deserves continued special scrutiny by both the Executive Branch and our Committees to ensure that our strategic and national security interests are protected,” the lawmakers wrote.

The lawmakers want an assessment before the investment moves to the second phase, which involves the transfer of export-restricted semiconductor chips and model weights — sophisticated data that enhances an AI model’s ability to emulate human reasoning.

The letter highlights increasing worries about the lack of regulations surrounding the export of sensitive AI models and the risk of such technologies being shared with US adversaries like China.

“We remain deeply concerned by attempts to move quickly to advance a partnership that involves the unprecedented transfer of highly sensitive, US-origin technology, without congressional consultation or clearly defined regulations in place,” the lawmakers wrote.

They requested an evaluation of G42’s connections to China’s Communist Party, military, and government before the deal proceeds. This concern is underscored by a recent visit from UAE President Sheikh Mohamed bin Zayed Al Nahyan to Beijing to discuss AI cooperation, the letter added.

“The geopolitical frictions and regulatory uncertainty cast a shadow on the global collaboration in the AI ecosystem,” said Charlie Dai, VP and principal analyst at Forrester. “The investment enhances the UAE’s position as a global AI hub, fostering innovation and growth opportunities for partners and customers, aiming to accelerate AI development and expand G42’s global reach.”

A request for comment from G42 and Microsoft remained unanswered.

The Flashpoint

In April this year, Microsoft had inked the deal with UAE’s G42 Group to “help enhance the UAE’s position as a global AI hub.” As per the agreement, G42 will run its AI applications and services on Microsoft Azure and partner with Microsoft to deliver advanced AI-based services. Besides, Microsoft president Brad Smith join the board of G42.

The said agreement did not exclusively mention whether Microsoft would provide high-end semiconductors chips that drive AI systems.

However, according to a Reuters report, the lawmakers had conversations with Microsoft and they expect that the US software giant to export “severely restricted AI semiconductor chips” to G42. In May this year, Microsoft President Brad Smith also told Reuters that the “deal with G42 could eventually involve the transfer of sophisticated chips and tools.”

“We recognize that Microsoft will restrict the transfer of sensitive technology to G42 during the first phase of the agreement and understand negotiations regarding the second phase involving the export of sensitive US-origin technology to the UAE are now underway,” the letter wrote. “If this second phase is to proceed, it will require significantly more robust national security guardrails than those included in Phase 1.”

The lawmakers also cited G42’s past digital surveillance work and connections to Emirati cybersecurity firm DarkMatter, which has been investigated for cyber espionage activities.

This is not the first time the US lawmakers have raised concern pertaining to G42.

In January, Chairman of the House Select Committee on the Chinese Communist Party, Mike Gallagher, had sent a letter to Commerce Secretary Gina Raimondo expressing serious concerns about export control risks related to G42. Gallagher highlighted G42’s extensive business relationships with Chinese military companies, state-owned entities, and the Chinese intelligence services.

The US has growing concerns about China’s influence in the Middle East, including the UAE.

“It is vital we do all we can to limit the PRC’s malign influence around the world, including in the Middle East. Should this deal proceed further, we must be clear eyed about the risks,” the lawmakers wrote.