US regulator compels Aramco to divest Altman-backed AI chip startup

Prosperity7, the venture capital fund of Aramco’s Aramco Ventures, invested in Rain Neuromorphics in February 2022, when the AI company raised a total of $25 million in a funding round.

AI Chips – the new battleships

Rain is building artificial brains that will make AI radically cheaper. In the long term, artificial brains are poised to become the dominant AI infrastructure and capture significant value in the AI stack.

But a review by the Committee on Foreign Investment in the United States (CFIUS) forced Prosperity7 to undo the deal and take a step back from Rain Neuromorphics.

The US is paying close attention to the actions of wealthy funds from the Middle East. They are becoming more cautious about entities that seem to have strong connections with China.

The US Treasury, which oversees the CFIUS process, told Reuters: “CFIUS is committed to taking all necessary actions within its authority to safeguard U.S. national security. Consistent with law and practice, CFIUS does not publicly comment on transactions that it may or may not be reviewing.”

China and the Middle East are getting closer, especially when the relationship with the U.S. and Europe is tense. There have been major transactions, with the two signing a local-currency swap agreement which is estimated to be worth $7 billion. 

Aramco has also invested billions of dollars in China’s energy sector as Saudi Arabia tries to attract Chinese tech companies, reported Bloomberg.

Trade restrictions

NVIDIA dominates the market for AI chips, but many startups around the world, including Rain, want to design chips that are cheaper and use less power. 

Only last month, the Biden administration strengthened its export rules on the sale of advanced semiconductors in a bid to prevent China’s access to advanced chips. The restrictions also apply to some countries in the Middle East.

These semiconductors are essential to the development of AI technology. Companies like NVIDIA and AMD, which supply these chips to China, were largely affected by the announcement. The move came roughly a year after the first round of chip export control.

This strengthening of home policies also reminds us of when back in March, the Biden Administration demanded TikTok’s parent company, Beijing-based ByteDance Ltd, to either sell their stakes or face a possible country-wide ban.