Microsoft in High-Level Talks with China: A New Era for AI and Trade Cooperation on the Horizon?

Microsoft Corp MSFT President Brad Smith met with China's Commerce Minister Wang Wentao to discuss artificial intelligence and trade relations between the U.S. and China. 

The engagement between Smith and Wang follows a recent meeting between U.S. President Joe Biden and Chinese President Xi Jinping, indicating an attempt by both nations to cooperate in areas like AI and to improve the business environment for foreign companies, CNBC reports.

Wang expressed China's commitment to enhancing services for foreign enterprises and hoped Microsoft would play a constructive role in AI cooperation between China and the U.S.

Microsoft, known for its significant investment in AI through its backing of ChatGPT developer OpenAI, is a critical player in this field.

China's tech giants, including Alibaba Group Holding Limited BABA, Baidu, Inc BIDU, and Tencent Holding Ltd TCEHY, are also developing their own AI models and competing products.

Technology remains a contentious issue in U.S.-China relations, with the U.S. attempting to limit China's access to critical technologies like semiconductors. 

Recent U.S. export restrictions have targeted Nvidia's Corp NVDA chips used in AI training. 

Meanwhile, Nvidia is testing the HGX H20 chip with Chinese server suppliers, but it likely has only about 20% of the computing power of Nvidia's H100. 

Nvidia, which holds over 90% of China's $7 billion AI chip market, announced that the company is working closely with the U.S. government to ensure its new chips for the Chinese market comply with recent export restrictions.

The Biden-Xi meeting underscored the need to address risks associated with advanced AI systems. Smith and Wang's meeting reflects similar objectives.

Due to increased tensions, U.S. tech firms' interactions with the Chinese government have become scarce. 

However, recent visits by Apple Inc AAPL CEO Tim Cook and Tesla Inc TSLA CEO Elon Musk to China, where their companies have significant market presence, suggest a thawing in relations, aided by eased COVID-19 travel restrictions and Beijing's push to attract foreign businesses.

Smith stated Microsoft's eagerness to participate in China's digital transformation and its commitment to fostering economic and trade cooperation between China and the U.S.

Price Action: MSFT shares are down 0.24% at $367.90 premarket on the last check Thursday.