Microsoft Pushes Trump to Drop Proposed China Tech Ban, Warns It Could Hurt US AI Race

Microsoft is reportedly pushing back against one of the Trump administration’s latest plans targeting Chinese technology. The company wants Washington to reconsider a proposed ban on Chinese optical transceivers used in AI data centers. The concern is straightforward. Cutting off Chinese suppliers could slow America’s ambitious AI infrastructure expansion.

Microsoft sees a major threat to America’s AI data center expansion

According to an exclusive report by Reuters, Microsoft and several technology companies and trade groups are urging the Trump administration to abandon the proposed restrictions. The plan would prevent imports of newer Chinese optical transceivers into the United States.

These components might sound relatively minor, but they play an important role in modern data centers. Optical transceivers convert electrical signals into light, allowing servers, switches, and routers to exchange enormous amounts of data through fiber-optic cables.

The US government reportedly fears Chinese-made devices could enable data theft, malware installation, or service disruptions. The Federal Communications Commission is considering restrictions amid these national security concerns.

However, Microsoft believes the timing could create another problem for America’s AI ambitions. According to Cleanview data cited by Reuters, Microsoft has 35 data centers under construction across the US. Another 134 are reportedly planned. Without enough optical transceivers, some of those facilities could face delays. The problem becomes even bigger when companies have already purchased expensive AI chips that cannot operate effectively without the necessary networking infrastructure.

China dominates a critical part of the supply chain

Interestingly, China accounts for around two-thirds of the global optical transceiver market, according to Counterpoint Research. Chinese manufacturers, including Eoptolink and Zhongji Innolight, hold significant positions in the industry.

American companies Coherent and Lumentum also manufacture competing products. However, they reportedly lack the production capacity to replace Chinese suppliers immediately. The Information Technology Industry Council has also opposed adding these components to the trade blacklist. One possible compromise involves restricting transceivers capable of handling 3.2 terabits per second. Production of these newer models is not expected to scale until 2028.

Speaking of China, Nvidia CEO Jensen Huang has also found himself caught up in a controversy involving suspected Chinese espionage allegations. Huang recently apologized to his family and Nvidia employees, while Nvidia launched an independent investigation. The situation has since taken another turn, with Nvidia and Huang facing a proposed shareholder class-action lawsuit over alleged investor deception.