The Battle to Control the World’s Most Powerful Technology

[Music]. from The New York Times I'm Katherine. benold and this is the. [Music]. daily the American company NVIDIA has. created one of the most sought-after. inventions in the world today a computer. chip that powers artificial intelligence. but the company has been in an ongoing. battle with the US government over its. chips being sold in China today my.

colleague Anna Swanson on her. investigation into America's escalating. War to control this crucial technology. and how it may be losing that. war it's Wednesday September. [Music]. 4th so Anna it's really hard to get into. China these days as a journalist but you. with there recently on a mission to find.

something tell us about that yeah so I. traveled to China actually with. Secretary of State Tony blinkin when he. went to China in April I'm a trade. reporter not a state department reporter. but the state department reporters were. on spring break with their families so I. stepped in and gladly went on that trip. there's been a lot of tension between. China and the United States and the. secretary of state was there on one of. many recent missions to try to stabilize.

and manage this relationship but I had. been working on this other story about. technology that the United States has. banned from going to China and I was. really curious if it is available in. China so I hopped on a train and I went. to Southern China to a city called. Shenzhen this is Shenzhen it's just. right across from Hong Kong on the main.

land and it is a capital of the tech. industry a really entrepreneurial City. it's Sunday afternoon they're lots of. shoppers out buying every kind of. electronics. imaginable and I went to this amazing. Electronics Market it stretches for. about half a mile but this Market is. like a maze it's just blocks of these. confusing buildings so we're doing a lot. of running around today it's this really. bustling place and it's a place that's.

notorious for selling basically any kind. of electronic that you might want cables. and electronic devices fake Dyson hair. dryers and apple watches and I'm. wandering around talking to different. vendors trying to see if anyone sells. this. technology. Ai and actually very quickly I did find. some who were willing to R.

sell. [Music]. it so what exactly is this piece of. technology that you found so these are. the most advanced AI chips made by the. US company NVIDIA they're essential now. for creating artificial. intelligence and they've really landed. themselves kind of at the center of this. technology war between the United States.

and China so how does it happen that. this banned product ends up being for. sale at this Chinese market so the. answer to that question is kind of. complicated but it's the culmination of. this multi-year cat and mouse game. between the US government and Nvidia and. I call it a game but the stakes are. really high it's happening in the. context of this bigger military and. geopolitical conflict between the United. States and China.

okay so there's a lot to digest here. let's maybe break this down when I hear. catam Mouse I'm kind of thinking Tom and. Jerry right a big player going after a. smaller player but perhaps a very Nimble. one who always somehow manages to escape. so I guess my question is in your. scenario who's the mouse so Nvidia in. this case is the. mouse this company was founded in 1993. by a group of Silicon Valley engineers. and they've always had this knack for.

making business decisions that people. didn't really understand at the time but. turned out to be very preent and really. paid off like what Nvidia is coming out. with a 3D game software and N the first. was early in their history they were. making chips that powered graphics for. video games and the company at one point. almost went bankrupt but it ended up. inventing a kind of novel graphics card.

that was. programmable and It ultimately dubbed. this the graphics Processing Unit or the. GPU nvidia's Graphics processing units. or gpus aimed to make video games ever. more realistic and I don't think the. rest of the world you know realized what. the implications of the GPU were for. computing until much later a single chip. able to process a myriad of calculations. all at once.

not sequentially like more standard. chips but actually Nvidia was thinking. about this pretty early by 2006 they had. started working on this software. platform that allowed you to use these. chips that were formerly for gaming for. a lot more tasks like science and. research and then things really kick off. with the sort of birth of AI which comes. in 2012 at that time researchers started.

using gpus to create an image. recognition model so they're creating a. a model that can recognize pictures of. things like cats or strawberries and. using these gpus they create this model. that basically blows the performance of. all the previous models out of the. [Music]. water over the next decade researchers. are making progress in AI using Nvidia. gpus it's their underlying Tech stuff.

that powers everything that we see in. this space they're so far ahead of. everybody and then in 2022 there is this. huge breakthrough when chat GPT which is. powered by Nvidia chips is released and. that's when everybody really woke up to. the power of this technology Nvidia is. posting record Revenue thanks to the AI. boom they're talking about $24.5 billion. dollar in revenue and basically over the. last year and a half in is revenue and.

its stock have Gone Bananas that's the. technical term for it well you know. Nvidia is up a. th% since chat GPT was introduced to the. world its value becomes bigger than. Amazon Google or Facebook Nvidia how. much further will it. [Music]. go wow so this is basically the biggest. company many people have never heard of. definitely.

and the secret to their success is they. are selling the vast majority of. hardware and software now that underpins. the AI boom so it's a little bit cheesy. but people like to say if the AI boom is. a gold rush Nvidia is the one selling. the pixs and shoves to. everyone so what you're saying is that. Nvidia is really synonymous with AI this. incredibly powerful technology that. everyone in the world is now trying to. get a hold of so that's the mouse who's. the cat in this cat and mouse game so.

the cat in this scenario is the US. government the US government starts to. become very interested in this. technology it's watching Nvidia chips. power science and AI developments all. over the world including in China and in. China it's making big strides in terms. of commercial industry but it's also. helping to develop the military so. basically Nvidia is a concern for the US. government because it's selling to China.

which is the US's main military and. economic rival and it's making a key. component that can be used in advanced. weapons technology which is worrying. right so I think the vast majority of. the chips that were sold to China by. Nvidia weren't used for military. purposes they're used for commercial. Technologies like powering social media. feeds and keeping high-speed trains from. derailing but they do go to designing.

new weapon systems and there are also. concerns about them being used for. surveillance for cyber tax and for. things like. disinformation and that's why the US. government is trying to figure out a way. to stop the flow of this technology to. China okay so how does the US try to do. that so the US has a few different. restrictions when it comes to technology. one of the most basic widely used ones.

is something called The Entity list and. what exactly is the entity list so the. entity list it's it's like a kind of. sanction it's a list that has foreign. companies universities and organizations. that the US considers a threat to. National Security and wants to stop the. flow of Technology. too The Entity list was started in the. Clinton. Administration but it was used more. sparingly at first and then the. government starts to use it much more. aggressively under the Trump and Biden.

administrations and particularly against. China and one of the companies that gets. added to this list is an Nvidia customer. and what makes this particular customer. of Nvidia so dangerous that the US. government decides to put it on this. entity list so this is a company called. sugon it's a technology company that. does Advanced Computing and it's buying. American Technology from Nvidia Intel. and Microsoft and in 2019 the US.

government adds them to the entity list. for helping to advance the Chinese. military and sugan has also built this. Computing Center in shinjang that the. Chinese government is using to surveil. weaker the minority population there. okay so Nvidia has been selling chips to. a company that effectively has been. partnering with the Chinese government. but now it can no longer sell its chips. to sugan yes but the thing about the. entity list is it's pretty easy to find. work grounds how so because the entity.

list is based on names and addresses of. particular companies and companies can. find ways to work around it by changing. those okay that seems like a big problem. yeah so in this example a bunch of. former sugon Executives have left the. company it's been entity listed and 6. months later they create a new company. which is called netrix they have a lot. of ties netrix executive are all former.

sugan Executives they use sugan's. technology they buy parts from sugan and. they serve some of the same customers. and we also found in reporting that nx's. owners shared a location with some of. sugan's Executives as well but the. companies say that they're separate. companies and Nvidia and Intel and. Microsoft all quickly form ties with. this new company netrix and continue to. sell technology to to it and that's.

technically legal so this is kind of a. gray area the companies need to do due. diligence to ensure that netrix is not a. front company for sucon and the. companies say that they've followed all. the rules but you know even if it's. legal you have to ask is this really. doing much to accomplish the. government's goals of stopping the flow. of advanced technology to China okay so. basically what you're saying is that. Nvidia is still finding ways to sell its.

technology to people the government. strictly speaking doesn't want it to. sell to or to go back to our metaphor. the mouse seems to have escaped the cat. and it's kind of incredible how easy it. seems to be to skirt these very serious. efforts by you know the most powerful. government in the world to stop the sale. of these. chips us officials are aware that the. entity list has some serious drawbacks. and very early in the Biden. Administration start thinking about more.

effective ways to restrict the flow of. technology to China and then in the. middle of this cat and mouse game. something happens they get a wakeup call. which really gets everyone's. attention there's new concern tonight. about China's military capabilities Amit. a report the country recently tested a. nuclear capable Hypersonic. missile so in the summer of 2021 China. tests this new weapon a Hypersonic. missile the report says the missile.

circled the Earth before speeding toward. its Target demonstrating an advanced. capability in space that quote caught us. intelligence by surprise and it's. important because it could theoretically. Dodge around US missile defense systems. to deliver a nuclear warhead to the. United States or take out US aircraft. carriers which is really important in. the event of a potential War over Taiwan. wow all this essentially means China is. close to being able to launch a nuclear.

warhead against any other Nation without. any warning and there'd be no defense. against it as and US officials are. really worried about it because this. technology surpasses what the United. States has developed and much is still. unclear about this technology but the US. government suspects that Nvidia chips. have helped to make this type of weapon. possible so in a way this missile. confirmed the us worst Fierce basically.

American Technology helping China to. build a weapon that was actually more. advanced than the US equivalent yes this. really scared people across the. government that the Chinese military. might be able to LEAP ahead in certain. areas so the United States decides to. double down on its efforts to restrict. Nvidia chips. [Music]. we'll be right.

back so Anna after this Chinese missile. that was powered and part by American. Technology totally freaked out the US. government what happens next in this cat. and mouse game with Nvidia so in 2022. the US tells Nvidia to stop selling its. most advanced chips at the time to. China I have an chipmaker Nvidia shares.

fell 7.7% after the chipmaker said the. US government is restricting some sales. into China so at this point the Biden. Administration is going not just after a. specific Chinese company but it halts. the sales of these most advanced chips. to the entire country of China it's a. move that could hamstring Chinese firm's. ability to carry out advanced work like. image recognition and cost Nvidia. hundreds of millions of dollars in. business so I guess in the this should. be a total shutdown right how does.

Nvidia react to this so Nvidia quickly. adapts Nvidia soon found a work around. developing a slightly less sophisticated. chip which got around the US. controls they take their most advanced. chip and they develop a slightly. downgraded version that's within the. limits set by the US government and they. quickly start selling it to China and. Chinese companies start snapping up this.

product and US officials are definitely. surprised and quite annoyed and the. refrain within the government is that. Nvidia is following the letter but not. the spirit of the rule and to Nvidia and. its Defenders this kind of charge is. ridiculous they say if the speed limit. is 65 mph and I'm going 63 am I breaking. the. law of course not. [Music].

I mean does Nvidia have a point in the. end it's up to the government right to. design its policy in a way that it. achieves its policy goal and this one. does not seem to be working all that. well so yeah the US realizes that these. degraded Nvidia chips will basically. allow China to do about the same thing. as before in terms of AI so the US. government decides to lower the speed. limit and also ban these newer chips.

that Nvidia has made but I think this. all raises an really interesting. question about these rules how far does. the US government need to go and how. much does the US want to erode the. business of this American company in. China so that we don't risk US National. Security the government has to walk this. very fine line between business. interests and National Security and. they're still trying to figure out where. this line is.

okay but while the government is trying. to figure out where this line is we do. know that these banned Nvidia chips are. still available in China as you yourself. saw at this Market in Shenzhen yeah I. found people there who are readily. willing to sell them there's no evidence. that Nvidia sold these chips directly to. the market or broke any laws here but. there are certainly avenues for the. chips to end up there so for one think. these chips are all manufactured in.

Taiwan and then they're sent to. companies around Asia that put them into. computers or sell them on and it seems. like there are plenty of middlemen and. Smugglers that are then forwarding these. chips on to China and making a good deal. in the. process so based on everything you've. told us am I correct in thinking that. Nvidia has won this cat and mouse game. well they don't think they're winning.

why is that so they've been shut off. from a massive Market in China so China. sales have gone from about 20% of the. company's Revenue to more like 10 now. and it's creating a massive open market. there for Chinese companies to. potentially develop rival products to. what Nvidia is offering so you're saying. it's almost like these us. restrictions have created a vacuum in. which. China is developing its own chip making.

capacity is it possible that these. restrictions hurt rather than help us. policy goals well I think the. restrictions are still definitely. slowing down China's industry and. China's chip development efforts because. the country can't get the most advanced. technology anymore to make its own chips. but it is creating this kind of huge. protected market for Chinese companies. to develop and it's certainly.

strengthening China's resolve the amount. of money that it's pumping into. technology in order to develop. alternatives to the United States this. is a trend that China was pursuing. before these us restrictions but now it. has no other. alternative and what do we actually know. about China's competition to envidia do. we have evidence that they are catching. up so Huawei the Chinese technology.

company has been rolling out some AI. chips and they still seem to be lagging. behind Nvidia but Huawei is reportedly. rolling out another AI chip this year. that will be as good as nvidia's most. advanced products wow um meanwhile. Nvidia is also racing ahead it's. planning to introduce a new more. advanced chip later this year that will. be a lot better but it's certainly a. race and what does the US government. make of the fact that China is now.

investing a ton in this AI space and in. fact that its leading company in the. space huave is starting to release chips. that could rival nvidia's chips so they. know that they're not stopping China. entirely but in the meantime the United. States is investing in its own chips. industry Nvidia and other companies are. continuing to innovate and the US is. trying to raise ahead and the US. government says that that lead matters.

so Anna we spent most of this episode. talking about a cat and mouse game. between the US government and Nvidia but. as you said yourself earlier behind all. of this is the race between the US and. China for technological and Military. Supremacy and so I guess the key. question here is as we're ending what. does this story about chips tell us. about the state of that. race yeah so there is a lot of concern. over the economic implications of this.

and the kind of collateral damage for us. companies that we've been talking about. and I think you know the government. doesn't want to cause that doesn't want. to harm us companies but it thinks that. the stakes are a lot higher. here that artificial intelligence and. Technology developments can change the. course of how the US and China develop. and their economies and their National. security and essentially America's.

technological Supremacy and Military. Supremacy has now been unquestioned for. decades and China's technological. development is starting to put us into. Uncharted. Territory and there are concerns that as. China develops that could change the. balance of power in ways that in a worst. case scenario could potentially put. peace at risk or lead to a war between. the.

countries so there are big questions. here can the US maintain its. technological Supremacy for how long and. what happens when China catches up and I. think we're just at the beginning of. that. [Music]. story Anna thank you very much thanks. for having. [Music]. me we'll be right back. [Music].

here's what else you need to know today. on Tuesday a federal judge in Manhattan. denied an effort by former president. Trump to claim immunity in his New York. State hush money case in which he was. already convicted earlier this year a. jury had found Trump guilty of covering. up payments he made while in office to a. porn star who had threatened to go. public about an Affair Trump invoked a.

recent Supreme Court ruling granting. president's broad immunity for official. acts but the judge said that ruling was. Irrelevant in this case harush money. payments he said were private unofficial. acts outside the bounds of executive. Authority the sentencing in this case is. scheduled for mid-september less than 7. weeks before election. day and a Russian missile strike killed. more than 50 people and injured many. more according to Ukrainian officials it.

was one of the deadliest attacks of the. 2 and a half year war two ballistic. missiles hid a military academy in a. neighboring Hospital in the Eastern. Ukrainian city of pava the attacks come. at a particularly active moment in the. war Ukraine is pressing an offensive. into Russian territory while Russian. forces are advancing in Ukraine's East. [Music]. today's episode was produced by Ricky.

nety Mo zadii and Eric krupy with help. from Luke Thunder pluk it was edited by. Lisa Chow contains original music by Dan. Powell Marin Lozano Pat mccusker and. Diane Wong and was engineered by Chris. Wood our theme music is by Jim brenberg. and Ben lansberg of Wy. [Music]. [Music].

that's it for the daily I'm cine benold. see you tomorrow. [Music].