The $1 billion AI project between Microsoft Corporation (NASDAQ:MSFT) and United Arab Emirates AI holding company G42 in Kenya has come under the scanner due to national security concerns.

What Happened: The deal, which was announced in May, was brokered with the involvement of the U.S. and UAE governments.

It was perceived as a potential model for similar collaborations aimed at extending the U.S.’s political and economic reach in the Global South. However, the reliance on Microsoft, G42, and the Emirati government has sparked national security concerns in Washington, reported Bloomberg.

The crux of the partnership is Microsoft’s agreement to invest $1.5 billion in G42, provided G42 severs its ties with Chinese companies. Despite this, Pentagon officials remain doubtful about G42’s total disengagement from China.

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The cybersecurity lapses at Microsoft have heightened fears of foreign powers gaining access to sensitive U.S. networks. There are also apprehensions about exporting advanced AI to Gulf states with dubious human rights records.

The immediate issue at hand is whether to greenlight shipments of Nvidia Corporation’s H100 chips, semiconductors used in AI data centers, to the Middle East.

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Why It Matters: Opposition to the G42-Microsoft deal could potentially obstruct the administration’s efforts to position U.S. companies at the forefront of AI development.

U.S. officials are keen to ensure that American firms, not their Chinese counterparts, reap the benefits of Gulf states’ aspirations to fund and construct major AI projects, the report noted.

This development comes in the wake of escalating tensions between the U.S. and China. Last month, the U.S. Ambassador to China, Nicholas Burns, accused Beijing of actively undermining diplomatic relations between the two nations.

“We’re working closely with the National Security Council and Department of Commerce, and U.S. national security will continue to be a principal priority,” stated Microsoft spokesperson David Cuddy.

Photo via Shutterstock

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.