Microsoft Warns Trump Administration's Proposed China Data-Center Tech Ban Could Slow US AI Buildout, Raise Costs: Report

Microsoft Corp. (NASDAQ:MSFT) and technology industry groups are reportedly pressing the Donald Trump administration to abandon a proposed ban on certain Chinese data-center technology, warning that restrictions could disrupt construction and weaken the U.S. AI advantage.

Microsoft and industry representatives met with White House science policy and National Security Council officials weeks after a previous report on the potential ban, Reuters reported on Tuesday.

The companies cautioned that supply-chain disruptions could delay data-center expansion and undermine the U.S. lead over China in artificial intelligence (AI).

The proposed measure is being developed by the Federal Communications Commission (FCC), which oversees U.S. telecommunications, the publication reported in August. It targets Chinese optical transceivers used in AI data centers, though the specific technology was not identified in the report. The concern is that Beijing could exploit them to steal data, deploy malware, or disrupt U.S. data center operations.

According to market intelligence firm Cleanview, Microsoft has 35 U.S. data centers under construction and another 134 in the pipeline.

Microsoft and the FCC did not immediately respond to Benzinga’s request for comments.

China Restrictions Could Raise AI Infrastructure Costs

The proposal follows an August warning from BNP Paribas that efforts to remove China from the U.S. AI supply chain could make domestic infrastructure more difficult and expensive to build. Optical transceivers carry data across fiber-optic networks and are important components in AI data centers.

The bank said a potential FCC ban on newly imported Chinese-made optical transceivers could affect Broadcom Inc. (NASDAQ:AVGO), Marvell Technology Inc. (NASDAQ:MRVL), Credo Technology Group Holding Ltd. (NASDAQ:CRDO), Nvidia Corp. (NASDAQ:NVDA) and Advanced Micro Devices Inc. (NASDAQ:AMD).

Futurum Equities strategist Shay Boloor said reported restrictions appear limited to 3.2T transceivers, leaving the ongoing 800G and 1.6T data-center buildout unaffected. An unverified Morgan Stanley client note also identified 3.2T as the likely starting point for phased restrictions, potentially keeping laser-component supplies tight and supporting demand for Lumentum Holdings Inc. (NASDAQ: LITE) and Coherent Corp. (NYSE: COHR).

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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