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A smartphone with a displayed AMD logo is placed on a computer motherboard in this illustration taken March 6, 2023. 

Dado Ruvic | Reuters

American semiconductor company Advanced Micro Devices has failed in getting a made-for-China AI chip past U.S. regulators and will need to apply for an export license, Bloomberg reported Tuesday.

The report said AMD designed the chip to have lower performance than its premium products in order to comply with U.S. export restrictions. But Bloomberg reported the Commerce Department did not clear the chip for sale in China because it was still too advanced.

AMD will now have to obtain a license from the department’s Bureau of Industry and Security, the report said.

It’s not clear if the company will apply for the license. AMD and the Commerce’s Bureau of Industry and Security did not immediately respond to CNBC’s requests for comment.

While the U.S. has restricted sales of products containing the nation’s most advanced semiconductor technologies to China, citing national security concerns, American companies have continued to sell mature or less advanced technologies to the massive market without licenses.

AMD’s products include chips that can be used to develop and train AI models – something U.S. officials have warned that Beijing could use to gain military advantages. 

AMD CEO Lisa Su: AI is the most important technology that has come in the last 50 years

In 2022, U.S. President Joe Biden’s administration unveiled an initial set of export controls to curb China’s access to advanced semiconductor technologies. Leading AI chip company Nvidia subsequently said it would sell slowed-down versions of their premium AI chips that comply with U.S. restrictions. 

However, those chips were also banned in October, when the U.S. expanded restrictions to include more technology and target chips that were seen as circumventing controls.

Nvidia has since redesigned products to be less powerful for the Chinese market to align with the 2023 restrictions. 

In the lead-up to the October restrictions, Nvidia had warned that further U.S. export curbs on its chips to China would risk a “permanent loss” for American semiconductor firms to lead in one of the world’s largest markets. 

In Nvidia’s November earnings call, Chief Financial Officer Colette Kress said China and other regions targeted by U.S. export controls had consistently contributed approximately 20% to 25% of data center revenue over the past few quarters. While Nvidia reported blockbuster fourth-quarter results, Kress noted during the February earnings call that data center revenue from China declined significantly following the U.S. export curbs.

Compared with Nvidia, AMD had a smaller foothold in the Chinese AI chip market prior to the trade restrictions. But the company has begun targeting the AI chip market more aggressively, launching a new MI300 product line that is seen as a challenge to GPU products from Nvidia.

It’s not clear which Chinese customers AMD designed the chips for. Some leading Chinese tech giants, such as Tencent have reportedly stockpiled enough advanced chips from Nvidia to train their AI chatbots’ capabilities for “at least a couple more generations.”

Meanwhile, U.S.-sanctioned Huawei is reportedly developing its own chips and chipmaking tools, along with other domestic firms, as Chinese companies attempt to fill the gap created by U.S. restrictions.

Despite restricted sales to China, shares of both Nvidia and AMD have soared amongst an AI frenzy. Nvidia is up more than 250% in the past year while AMD surged over 150%.

Read the full report from Bloomberg.

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Baidu, once China’s generative AI leader, is battling to regain its position

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Baidu, once China’s generative AI leader, is battling to regain its position

Pictured here is the Ernie bot mobile interface, with the Baidu search engine home page in the background.

Future Publishing | Future Publishing | Getty Images

Chinese tech giant Baidu has released two new free-to-use artificial intelligence models as it vies to regain its leading position in the country’s fiercely competitive AI space. 

The Baidu models launched Sunday included the company’s first reasoning-focused model, and come ahead of plans to move toward an open-source strategy. 

However, experts told CNBC that while the release of the models is a positive development for Baidu, they also highlight how it is playing catch up as its Ernie bot — one of China’s earliest versions of a ChatGPT-like chatbot — struggles to gain widespread adoption. 

“The new models make Baidu more competitive since the company has been lagging behind in a reasoning model release,” Lian Jye Su, chief analyst at Omdia, told CNBC.

A reasoning model is a large language model that breaks down tasks into smaller pieces and considers multiple approaches before generating a response. It is designed to process complex problems in a similar way to humans.

Chinese startup DeepSeek upended the global AI race and transformed China’s ecosystem in January when it released its R1 reasoning model, which rivaled American competitors despite costing a fraction of the price.

Baidu has said its new ERNIE X1 reasoning model “delivers performance on par with DeepSeek R1 at only half the price,” and has “stronger understanding, planning, reflection, and evolution capabilities.” CNBC has not been able to independently verify this claim.

According to Wei Sun, principal analyst of artificial intelligence at Counterpoint Research, Baidu’s future competitiveness could hinge on whether its new models deliver on the promised performance and cost advantages. 

“Baidu is clearly in catch-up mode, largely due to its slow innovation pace and underestimating rapid shifts in market dynamics,” Sun said. 

What happened? 

Baidu rolled out its first generative AI platform to the public in 2023, giving China one of its first answers to OpenAI’s popular AI chatbot ChatGPT. 

However, despite initial momentum, Baidu’s Ernie product has since been eclipsed by competitors including startups as well as large-tech companies such as Alibaba and ByteDance.

Experts list a number of reasons for Baidu’s struggles and slow rate of innovation.

“Baidu fell behind when they tried to build proprietary models and compete for funding for AI,” Ray Wang, principal analyst and founder of Constellation Research, told CNBC. He added that the company has also suffered from recent government crackdowns and was distracted by “regulatory nonsense.” 

CFOTO | Future Publishing | Getty Images

Proprietary models keep their source code and underlying architecture confidential, in contrast to models from the likes of DeepSeek, whose source code is made freely available on the open web for possible modification and redistribution.

“Using a closed-source approach means that [Baidu] was training its model from scratch whereas the open-source models were able to leverage certain parts that were communal to developers,” said Kai Wang, a senior equity analyst for Morningstar. 

Baidu, however, said last month that it would make its next-generation AI model Ernie open-source from June 30, according to Reuters.

“Baidu has always been very supportive of its proprietary business model and was vocal against open source, but disruptors like DeepSeek have proven that open source models can be as competitive,” said Omdia’s Su. 

He added that Baidu is “merely following the footstep” of its biggest competitors in China, namely Alibaba, DeepSeek, and Tencent, which have all now released open-source models. 

Baidu’s advantages

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Baidu shares jump 10% following release of new open-source AI models

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Baidu shares jump 10% following release of new open-source AI models

ZHEJIANG, CHINA – MARCH 16 2023: A view of the logo of ERNIE Bot, an AI chatbot service developed by Chinese search engine Baidu, March 16, 2023.

Long Wei | Future Publishing | Getty Images

Shares of Chinese tech giant Baidu were trading up 10.7% in Asia on Tuesday, as investors appeared to react positively to the release of two new AI models over the weekend.  

Baidu released two new artificial intelligence models on Sunday, including the latest version of its foundational “Ernie” model and a new reasoning model that it said rivaled DeepSeek’s R1 model. CNBC is not able to verify these claims.

A reasoning model is a large language model designed to process complex problems in a similar way to humans, breaking prompts down into smaller pieces and considering multiple approaches before generating responses. 

According to Kai Wang, a senior equity analyst for Morningstar, the stock jump is likely a “delayed reaction” to the new models as Baidu vies to regain a leading position in China’s AI space. 

“The stock also hasn’t gotten as much love as the other hyperscalers but still it’s a platform that stands to benefit from greater AI demand since enterprises will need someone to help them with hosting, scaling, and computing power,” he said.

A hyperscaler refers to a major cloud computing company that provides massive data centers for computing storage and demands.

Baidu said on Sunday that its ERNIE X1 reasoning model “delivers performance on par with DeepSeek R1 at only half the price,” and has “stronger understanding, planning, reflection, and evolution capabilities.”

Chinese AI start-up DeepSeek upended the AI industry in January when it released its R1 open-source reasoning model, which rivaled models of American competitors, despite claims it was produced at a fraction of the cost and with far less powerful chips.

DeepSeek quickly overtook Baidu in China’s AI race, despite the company being one of the first in the market to launch a ChatGPT-like chatbot with its Ernie Bot, according to Wei Sun, principal analyst of artificial intelligence at Counterpoint Research, who noted other tech giants like Alibaba and Bytedance have also pulled ahead.

“Baidu’s competitiveness hinges on whether its new models truly deliver on the promised performance and cost advantages,” Sun said, noting, however, that AI pricing, particularly in China’s market, is highly fluid.

Baidu’s latest models, similarly to DeepSeek’s R1, have been released as open-sourced, meaning the source code is freely available on the open web for possible modification and redistribution. 

This represents a change from Baidu’s prior strategy of focusing on proprietary models. 

“By open-sourcing its models, Baidu seeks to once again position its technology as an industry standard, strengthening its influence in the AI community and expand its market share,” said Sun.

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Software startup Rippling sues competitor Deel, claiming a spy carried out ‘corporate espionage’

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Software startup Rippling sues competitor Deel, claiming a spy carried out 'corporate espionage'

Co-founder & CEO of Rippling Parker Conrad speaks onstage during the TechCrunch Disrupt conference in San Francisco on Oct. 20, 2022

Kimberly White | TechCrunc | Getty Images

Human resources software startup Rippling sued competitor Deel in federal district court on Monday, claiming that “Deel cultivated a spy” to orchestrate a trade-secret theft.

The employee met with Deel executives and passed internal Rippling records to a reporter, according to San Francisco-based Rippling’s complaint in the U.S. District Court for California’s Northern District.

Rippling claimed in the filing Deel violated the 1970 Racketeer Influenced and Corrupt Organizations Act and misappropriated trade secrets.

The two startups are among the most world’s most valuable. Investors valued Rippling at $13.5 billion in a funding round announced last year, while Deel told media outlets in 2023 that it was worth $12 billion. Deel ranked No. 28 on CNBC’s 2024 Disruptor 50 list.

“Weeks after Rippling is accused of violating sanctions law in Russia and seeding falsehoods about Deel, Rippling is trying to shift the narrative with these sensationalized claims,” a Deel spokesperson told CNBC in an email. “We deny all legal wrongdoing and look forward to asserting our counterclaims.”

Rippling confirmed its findings earlier this month. The company’s general counsel sent a letter to three Deel executives that referred to a new Slack channel, and the Deel spy quickly looked for it. Rippling subsequently served a court order to the spy at its office in Dublin, Ireland requiring him to preserve information on his mobile phone.

“Deel’s spy lied to the court-appointed solicitor about the location of his phone, and then locked himself in a bathroom — seemingly in order to delete evidence from his phone — all while the independent solicitor repeatedly warned him not to delete materials from his device and that his non-compliance was breaching a court order with penal endorsement,” Rippling said in Monday’s filing. “The spy responded: ‘I’m willing to take that risk.’ He then fled the premises.”

Rippling hired the person whom it calls the Deel spy for a management role in 2023, as the two companies were becoming more competitive, the filing says. Deel had used Rippling’s software, but Rippling opted to not renew Deel’s contract, according to the legal filing.

The spy repeatedly accessed information about Rippling customers, quotes, sales calls, demos and support requests in internal Slack repositories, according to the filing. He found and downloaded Rippling’s guidance on how to go up against Deel for prospective business, too, the filing says.

Then, in February, a reporter at The Information sent an inquiry to Rippling that included Slack messages from inside Rippling, which the startup concluded were collected by the Deel spy, the filing says. Additionally, email records suggest that the spy met with Deel executives in December, Rippling said in the complaint.

“We always prefer to win by building the best products and we don’t turn to the legal system lightly,” Parker Conrad, Rippling’s co-founder and CEO, said in a Monday X post. “But we are taking this extraordinary step to send a clear message that this type of misconduct has no place in our industry.”

This isn’t Conrad’s first legal entanglement over data access. In 2015, ADP dropped a defamation lawsuit that claimed his previous HR startup, Zenefits, had obtained information from clients in order to provide them with payment processing services.

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