The White House has taken one of the most significant steps yet in its quest to cut China’s tech sector off from American support.
President Joe Biden yesterday issued an executive order signaling a ban on new U.S. investments in key areas of Chinese technology that could be used to do things like develop more sophisticated weapons systems or aid military codebreaking. The order specifically targets “sensitive technologies and products in the semiconductors and microelectronics, quantum information technologies, and artificial intelligence sectors.”
The Treasury Department said it “anticipates excepting certain transactions, including potentially those in publicly traded instruments and intracompany transfers from U.S. parents to subsidiaries.” The department is taking written comments for the next 44 days regarding the scope of the order.
China “eliminate[s] barriers between civilian and commercial sectors and military and defense industrial sectors, not just through research and development, but also by acquiring and diverting the world’s cutting-edge technologies, for the purposes of achieving military dominance,” said Biden—whose own commerce and defense departments just agreed to coordinate their local semiconductor investments, to support the U.S. military—in the order.
The Chinese government, which just introduced new rules that effectively require foreign app developers to have a Chinese office or partnership to keep operating there, complained that Biden’s order “affects the normal business decisions of enterprises, disrupts the international economic and trade order, and seriously disrupts the security of global industrial and supply chains.”
The order is a declaration of a national emergency, but it’s not clear that it will have much of a measurable impact in the short term, as U.S. private equity and VCs have already cooled on Chinese investments. However, it could be expanded in the future, and even now it sends a heck of a message: China’s military is not going to get stronger thanks to American money or tech advances.
“The thing we’re trying to prevent is not money going into China overall, because they have plenty of money,” an unnamed U.S. official told CNN. “The thing they don’t have is know-how.”
Meanwhile, the Financial Times reports that Baidu, ByteDance, Tencent, and Alibaba are all scrambling to get their hands on high-performance Nvidia chips that they need for their large language models, with collective orders running to $5 billion. The A800 chips they’ve ordered are already relatively slow, thanks to the Biden administration last year hardening export restrictions, but the Chinese tech giants’ A.I. ambitions would be severely set back without them, and they fear even stronger export restrictions could be coming.
That sounds like a reasonable assumption. More news below—and do also check out the Fortune Founders Forum, which just launched today. Unsurprisingly, many of the entrepreneurs in this new club come from the tech world.
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David Meyer
NEWSWORTHY
A.I. being dangerous again. Here are two exciting new reasons to worry about welcoming generative A.I. into your life. The Washington Post reports that chatbots like ChatGPT and Bard happily give advice on how to maintain eating disorders, and picture-generating A.I. Stable Diffusion will generate pro-anorexia imagery when asked. Meanwhile, the Guardian reports on a New Zealand grocery chain’s new recipe-generating A.I. app, which has recommended delights such as “a bleach ‘fresh breath’ mocktail, ant-poison and glue sandwiches, ‘bleach-infused rice surprise’ and ‘methanol bliss’—a kind of turpentine-flavored French toast.”
Threads interoperability. Remember how Meta’s Threads is supposed to gain interoperability with other ActivityPub-based social networks like Mastodon? According to TechCrunch, the first step has now been taken, with Threads gaining support for the “rel=me” links that establish relationships between accounts on different networks. Instagram chief Adam Mosseri: “Proud of the team for taking meaningful steps towards adopting open standards and the fediverse.”
Life after Twitter. Former members of Twitter’s public policy team have formed a new global advisory firm called Blue Owl Group. “People may not have always agreed with the company’s decisions—sometimes we didn’t either. But our hope is they trusted us and understood our ethics,” they say on their website. “A key metric we are looking for in our partnership is a commitment to positive impact and social responsibility,” they add regarding the clients they’re seeking.
ON OUR FEED
“That sounds like a good idea too.”
—Elon Muskconsiders TED head Chris Anderson’s suggestion that a “cage match DEBATE” would be preferable to Musk and Mark Zuckerberg physically pummeling one another, as is currently the plan
IN CASE YOU MISSED IT
Elon Musk’s Twitter was fined $350,000 for snubbing the special counsel investigating Donald Trump, by Associated Press
First Netflix, now Disney: Bob Iger hints that the next password crackdown is coming as his streaming business loses half a billion dollars, by Eleanor Pringle
From $47 billion to $270 million—WeWork, the Adam Neumann brainchild, keeps crashing after a ‘going concern’ warning, by Will Daniel
Ripple v. SEC: Why the crypto industry may have celebrated too early, by Peter Fox
BEFORE YOU GO
LK-99 disappointment. South Korean researchers last month claimed to have discovered a material that acted as a superconductor at standard room temperature and pressure. Such a substance would be revolutionary in many applications, such as power grids, but this particular material—LK-99, a copper-doped lead apatite—ain’t it.
In an excited/skeptical global collaborative push, scientists scrambled to replicate what Seoul’s Quantum Energy Research Centre did—but they haven’t found LK-99 to be anything special, knocking semiconductor stocks. Now The Register reports that the University of Maryland's Condensed Matter Theory Center (CMTC) has established LK-99 isn’t a superconductor at all, let alone one that can operate at room temperature. This X post from the CMTC really seems to conclude the matter, noting that “LK-99 seems to be an anti-[superconductor].”
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