Microsoft has reportedly asked China-based cloud computing and artificial intelligence operations employees to consider relocating out of the country, as Washington cracks down on Beijing’s access to the advanced technology. 

The Wall Street Journal broke the story on Thursday, reporting that the staff, mostly comprising Chinese engineers, had been offered the opportunity to transfer to countries including the U.S., Ireland, Australia, and New Zealand, according to unnamed sources. 

One source told WSJ that Microsoft had made the offer to about 700 to 800 people in total who were involved in machine learning and other work related to cloud computing. 

CNBC could not independently verify the report.

In a statement shared with CNBC, a Microsoft spokesperson confirmed that the company had “shared an optional internal transfer opportunity with a subset of employees” without supplying details on the number and affiliation of staff affected.

“We remain committed to the region and will continue to operate in this and other markets where we have a presence,” the spokesperson said, adding that the potential transfers would not impact operations.

Microsoft employs roughly 7,000 engineers for its Asia-Pacific research-and-development group, with most of this workforce based in China, the WSJ reports.

The move comes amid U.S. efforts to prevent China from developing cutting-edge AI technology, which could be used for military purposes. In the past two years, the U.S. has placed waves of restrictions on China limiting its ability to buy advanced chips and chip-making equipment that can be deployed to train AI models. 

Now, the Biden administration is looking to place new guardrails on the export of advanced AI models, such as the large language model that powers Microsoft-backed ChatGPT, according to recent reports. 

There is currently little government oversight stopping companies like Microsoft, one of the U.S.’s largest cloud-computing and AI players, from selling or offering AI model services to foreign entities. 

The U.S. reportedly fears that AI models, which mine vast amounts of data to generate content, could be used for cyber attacks or to create biological weapons.

Earlier this year, Microsoft released a report stating that state-backed hackers from Russia, China, and Iran had been using tools from OpenAI to hone their skills and support their hacking campaigns. 

Microsoft has been deeply ingrained in China for more than three decades, even as other Western tech companies were pushed out by strict regulation. The company says that China is home to its largest R&D center outside of the U.S.

Read the full report from Wall Street Journal.

India offers a “very favorable” environment for companies to launch initial public offerings, said Shailendra Singh, managing director at Peak XV Partners, formerly Sequoia Capital India & Southeast Asia.

“My general view is, especially in Indian public markets, the regulatory framework, what Securities and Exchange Board of India does, what Reserve Bank of India does, what other regulators do is actually really good,” Singh told CNBC.

Singh, who has been at the VC firm for 18 years and led it since 2011, said India has created “a very favorable environment” for companies to list there. “It’s both safe and dynamic in India for a young company to be able to go public.”

There were 220 IPOs in India last year, up 48% from 2022, making it the second-largest IPO market in the world, according to an EY report. Though Mainland China took the top spot, the number of IPOs there slid 29% to 302.

The Indian IPO market is set to remain strong in 2024, buoyed by optimistic investor sentiment, a robust economy, and expectations of lower inflation and rate cuts, EY said.

“The Indian capital markets have evolved quite a bit. The markets have deepened in terms of liquidity. There’s lots of interest in tech companies coming up because … we are beginning to see a large number of companies with triple-digit million revenues and profits,” Singh said.

India is emerging as a bright spot amid global macroeconomic uncertainty, mainly driven by optimism over the country’s resilient economic fundamentals, KPMG said last month in its report “IPOs in India.”

On why some Indian firms prefer to list locally, Singh said: “Founders are realizing that the U.S. markets may not always understand Indian companies.”

As many as 20 companies including Zomato and Mamaearth in Peak XV’s portfolio have listed via IPOs, the firm said. Peak XV Partners, one of Asia’s largest tech investors, manages $9 billion in assets.

In June, Sequoia divided its global partnership into three independent units, namely Sequoia Capital in the U.S. and Europe, Peak XV Partners in India and Southeast Asia and HongShan in China.

The venture capital firm has invested in more than 400 companies across the technology, software, financial services and consumer sectors including India’s fintech firm Pine Labs, Indonesian coffee chain Kopi Kenangan, Singapore-based online marketplace Carousell and edtech companies Byju’s and Unacademy.

China will remain an important market for investors in the long term, even if other countries are now benefiting from investments flowing out of China amid escalating tensions with the U.S., according to Peak XV Partners, formerly Sequoia Capital India and Southeast Asia.

“The China Plus One strategy, in terms of sourcing and so on, is definitely benefiting places like India, Southeast Asia,” said Shailendra Singh, managing director of Peak XV Partners, one of Asia’s biggest venture capital firms with $9 billion of assets under management.

“In the very long term, if you take a 10, 20, 30-year view, if you assume that geopolitics will find some new normal, China is going to be a huge economy, and good businesses will be built in China,” Singh told CNBC’s Tanvir Gill.

Last year, Sequoia split into three independent geographic units – Sequoia Capital in the U.S. and Europe, Peak XV Partners in India and Southeast Asia and HongShan in China. The move came amid increasingly strained relations between Washington and Beijing.

Peak XV has invested in over 400 companies in the technology, software, financial services and consumer space. They include fintech firm Pine Labs, Singapore-based online retailer Carousell, Indonesian ride-hailing giant Gojek as well as Indian edtechs Byju’s and Unacademy.

For years, China has been Asia’s technology and innovation powerhouse, being home to tech juggernauts including Alibaba Group and Tencent. It has also gained the title of being the world’s factory, producing low-cost consumer goods as well as most of the world’s iPhones and electric vehicles.

However, firms such as Apple and BMW have been diversifying their supply chains away from China amid geopolitical concerns. Apple now reportedly makes around 1 in 7, or 14%, of its iPhones in India, after stringent Covid controls in China disrupted its operations there.

While India and Southeast Asian countries have been benefiting from such diversification efforts as companies set up operations elsewhere, China will still be an important market, said Singh.

“All of us around the world, while India or Southeast Asia might benefit in the short term, should really be thinking about how would we work well with China in the long term,” said Singh.

David Roche, president and global strategist at Independent Strategy, said in March that India won’t replace China in global trade as the Chinese model was “based on achieving global market share” while the Indian model is “about domestic market development.”

“India will continue to make progress but it will a slow and steady progress, and not at all similar to the Chinese model,” said Roche.