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Microsoft Makes High-Stakes Play in Tech Cold War With Emirati A.I. Deal

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Microsoft on Tuesday plans to announce a $1.5 billion investment in G42, an artificial intelligence giant in the United Arab Emirates, in a deal largely orchestrated by the Biden administration to box out China as Washington and Beijing battle over who will exercise technological influence in the Gulf region and beyond.

Under the partnership, Microsoft will give G42 permission to sell Microsoft services that use powerful A.I. chips, which are used to train and fine-tune generative A.I. models. In return, G42, which has been under scrutiny by Washington for its ties to China, will use Microsoft’s cloud services and accede to a security arrangement negotiated in detailed conversations with the U.S. government. It places a series of protections on the A.I. products shared with G42 and includes an agreement to strip Chinese gear out of G42’s operations, among other steps.

“When it comes to emerging technology, you cannot be both in China’s camp and our camp,” said Gina Raimondo, the Commerce Secretary, who traveled twice to the U.A.E. to talk about security arrangements for this and other partnerships.

The accord is highly unusual, Brad Smith, Microsoft’s president, said in an interview, reflecting the U.S. government’s extraordinary concern about protecting the intellectual property behind A.I. programs.

“The U.S. is quite naturally concerned that the most important technology is guarded by a trusted U.S. company,” said Mr. Smith, who will take a seat on G42’s board.

The investment could help the United States push back against China’s rising influence in the Gulf region. If the moves succeed, G42 would be brought into the U.S. fold and pare back its ties with China. The deal could also become a model for how U.S. firms leverage their technological leadership in A.I. to lure countries away from Chinese tech, while reaping huge financial awards.

But the matter is sensitive, as U.S. officials have raised questions about G42. This year, a congressional committee wrote a letter urging the Commerce Department to look into whether G42 should be put under trade restrictions for its ties to China, which include partnerships with Chinese firms and employees who came from government-connected companies.

In an interview, Ms. Raimondo, who has been at the center of an effort to prevent China from obtaining the most advanced semiconductors and the equipment to make them, said the agreement “does not authorize the transfer of artificial intelligence, or A.I. models, or GPUs” — the processors needed to develop A.I. applications — and “assures those technologies can be safely developed, protected and deployed.”

While the U.A.E. and United States did not sign a separate accord, Ms. Raimondo said, “We have been extensively briefed and we are comfortable that this agreement is consistent with our values.”

In a statement, Peng Xiao, the group chief executive of G42, said that “through Microsoft’s strategic investment, we are advancing our mission to deliver cutting-edge A.I. technologies at scale.”

The United States and China have been racing to exert technological influence in the Gulf, where hundreds of billions of dollars are up for grabs and major investors, including Saudi Arabia, are expected to spend billions on the technology. In the rush to diversify away from oil, many leaders in the region have set their sights on A.I. — and have been happy to play the United States and China off each other.

Although the U.A.E. is an important U.S. diplomatic and intelligence partner, and one of the largest buyers of American weapons, it has increasingly expanded its military and economic ties with China. A portion of its domestic surveillance system is built on Chinese technology and its telecommunications work on hardware from Huawei, a Chinese supplier. That has fed the worries of U.S. officials, who often visit the Persian Gulf nation to discuss security issues.

But U.S. officials are also concerned that the spread of powerful A.I. technology critical to national security could eventually be used by China or by Chinese government-linked engineers, if not sufficiently guarded. Last month, a U.S. cybersecurity review board sharply criticized Microsoft over a hack in which Chinese attackers gained access to data from top officials. Any major leak — for instance, by G42 selling Microsoft A.I. solutions to companies set up in the region by China — would go against Biden administration policies that have sought to limit China’s access to the cutting-edge technology.

“This is among the most advanced technology that the U.S. possesses,” said Gregory Allen, a researcher at the Center for Strategic and International Studies and a former U.S. defense official who worked on A.I. “There should be very strategic rationale for offshoring it anywhere.”

For Microsoft, a deal with G42 offers potential access to huge Emirati wealth. The company, whose chairman is Sheikh Tahnoon bin Zayed, the Emirates’ national security adviser and the younger brother of the country’s ruler, is a core part of the U.A.E.’s efforts to become a major A.I. player.

Despite a name whimsically drawn from “The Hitchhiker’s Guide to the Galaxy,” in which the answer to the “ultimate question of life” is 42, G42 is deeply embedded in the Emirati security state. It specializes in A.I. and recently worked to build an Arabic chatbot, called Jais.

G42 is also focused on biotechnology and surveillance. Several of its executives, including Mr. Xiao, were associated with a company called DarkMatter, an Emirati cyber-intelligence and hacking firm that employs former spies.

In its letter this year, the bipartisan House Select Committee on the Chinese Communist Party said Mr. Xiao was connected to an expansive network of companies that “materially support” the Chinese military’s technological advancement.

The origins of Tuesday’s accord go back to White House meetings last year, when top national security aides raised the question with tech executives of how to encourage business arrangements that would deepen U.S. ties to firms around the world, especially those China is also interested in.

Under the agreement, G42 will cease using Huawei telecom equipment, which the United States fears could provide a backdoor for the Chinese intelligence agencies. The accord further commits G42 to seeking permission before it shares its technologies with other governments or militaries and prohibits it from using the technology for surveillance. Microsoft will also have the power to audit G42’s use of its technology.

G42 would get use of A.I. computing power in Microsoft’s data center in the U.A.E., sensitive technology that cannot be sold in the country without an export license. Access to the computing power would likely give G42 a competitive edge in the region. A second phase of the deal, which could prove even more controversial and has not yet been negotiated, could transfer some of Microsoft’s A.I. technology to G42.

American intelligence officials have raised concerns about G42’s relationship to China in a series of classified assessments, The New York Times previously reported. Biden administration officials have also pushed their Emirati counterparts to cut the company’s ties to China. Some officials believe the U.S. pressure campaign has yielded some results, but remain concerned about less overt ties between G42 and China.

One G42 executive previously worked at the Chinese A.I. surveillance company Yitu, which has extensive ties to China’s security services and runs facial-recognition powered monitoring across the country. The company has also had ties to a Chinese genetics giant, BGI, whose subsidiaries were placed on a blacklist by the Biden administration last year. Mr. Xiao also led a firm that was involved in 2019 in starting and operating a social media app, ToTok, that U.S. intelligence agencies said was an Emirati spy tool used to harvest user data.

In recent months, G42 has agreed to walk back some of its China ties, including divesting a stake it took in TikTok owner ByteDance and pulling out Huawei technology from its operations, according to U.S. officials.

Edward Wong contributed reporting.



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Final Arguments in Google Antitrust Trial Conclude, Setting Up Landmark Ruling

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A landmark antitrust trial against Google concluded on Friday after a federal judge heard final arguments, setting the stage for a ruling that could fundamentally shift the tech industry’s power.

“The importance and significance of this case is not lost on me, not only for Google but for the public,” Judge Amit P. Mehta said in the final moments of the proceedings on Friday. He thanked the lawyers who argued the case, and then added, “I guess you’ve passed the baton to us.”

Now, he must decide the case in which the Justice Department and state attorneys general say that Google has abused a monopoly over the search business, stifling competitors and limiting innovation, something the company denies.

During two days of closing arguments, Judge Mehta of the U.S. District Court for the District of Columbia did not reveal how he planned to rule. He grilled both sides, frequently referencing testimony and evidence from the 10-week trial last year to poke holes in their arguments. He also demanded that they explain how their positions fit with major legal precedents.

As the proceedings closed on Friday, Kenneth Dintzer, the Justice Department’s lead trial lawyer, argued that if antitrust laws “cannot thaw” a search business dominated by Google, the company’s practices will continue into the future.

John E. Schmidtlein, Google’s lead lawyer, countered that a ruling in favor of the government “would be an unprecedented decision to punish a company for winning on the merits.”

Judge Mehta’s ruling in the coming weeks or months will probably influence the course of other government antitrust lawsuits against Apple, Amazon and Meta, the owner of Instagram and WhatsApp, as U.S. regulators try to rein in their power.

The government argues Google illegally cemented a monopoly in search by paying Apple and other tech partners billions of dollars to feature the Google search engine in their products.

On Friday, the discussion focused on the government’s second claim that the company also has a monopoly over the ads that run in search results.

Google pointed to other companies that compete in search and advertising.

“Facebook, Instagram, TikTok, Amazon — all of these companies have very, very detailed and very useful information that allows them to give advertisers lots and lots of different options to reach the consumer groups they’re most interested in,” Mr. Schmidtlein argued.

Judge Mehta asked the Justice Department, to explain why search ads were so different from ads on Facebook and other social platforms.

“How does that measure up with reality?” he asked. “It can’t be that Facebook’s ad platform is an inferior product and they’re making billions of dollars.”

Judge Mehta also mentioned the success of TikTok, which, he said, had a “pretty good ad platform” and was growing. He said he had spent some time using TikTok’s search to research the case.

In a seeming nod to national security concerns about that app, he added: “Not that I have it on my phone, just to be clear.”

The government also said the judge should sanction Google for a company policy that automatically turned off the history for workplace chats, arguing that the policy resulted in the destruction of evidence. Mr. Dintzer said the court needed to “say this is wrong” to stop Google from hiding evidence in the future. A lawyer for Google, Colette T. Connor, denied the company had done anything inappropriate.

“Let me just be perfectly candid,” Judge Mehta said. “Google’s document retention policy leaves a lot to be desired.”



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Instagram courts TikTok users with algorithm revamp

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With TikTok’s future uncertain, Instagram is trying to get more viral content on its Reels feature.



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Have the wheels come off for Tesla?

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As the electric carmaker sees sales fall and cuts jobs, we take a closer look at its problems.



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