Oracle has allowed ByteDance, TikTok's parent company, to lease Nvidia's H100 AI chip despite the US government's ban on exporting high-end chips to China.

Since 2022, the US has issued a ban on the sale of advanced AI chips to China to prevent the use of this technology for military and surveillance purposes. However, according to a report by The Information published on Thursday, Oracle has allowed ByteDance, the owner of TikTok, to rent Nvidia's H100 chips on US soil to train AI models.

ByteDance, a company suspected of having ties to the Chinese government, rented servers containing H100 chips from Oracle to train AI models. This action, although it violates the spirit of the ban, is still technically legal because Oracle only leases chips on US soil, not selling directly to companies in China.

The US government is concerned about China's ability to use advanced AI for military purposes, surveillance and to gain economic advantage. In April this year, the US government passed a law requiring ByteDance to sell its US business or face a ban. ByteDance is suing the US government, which could delay the implementation of the ban.

According to US cloud service providers and former Nvidia employees, it is difficult to prevent ByteDance from sending developed models to China. ByteDance's Project Texas project was announced to separate TikTok's operations in the US from the management of Chinese leaders, but former employees said that this project was only a formality.

Not only ByteDance, Chinese companies such as Alibaba and Tencent are also finding ways to circumvent the law to access advanced AI chips. These companies can have an easier time because they have data centers in the US and do not need to rent servers from US companies.

Not every company is as willing to bend the law as Oracle. Two small US cloud service providers have refused to lease servers containing Nvidia's H100 chip to ByteDance and China Telecom, saying this goes against the spirit of US chip restrictions. However, Oracle, co-founded by businessman Larry Ellison and currently run by CEO Safra Catz, saw the profit opportunity from these legal circumventions and could not refuse.

This incident has raised many questions about the effectiveness of US AI chip export controls, especially in the context of escalating tensions between the two powers. The US Department of Commerce is working to close this weakness but faces many challenges as big technology companies and defense interests vie for control.