On Thursday, the Biden administration has compelled a venture capital firm supported by Saudi Aramco to sell its stake in a Silicon Valley AI chip business that is supported by Sam Altman, the co-founder of OpenAI.

In 2022, Rain Neuromorphics, a firm funded by Altman that creates chips that imitate brain function and targets businesses with AI algorithms, raised $25 million.

(Photo : by Justin Sullivan/Getty Images)
On Thursday, the Biden administration has compelled a venture capital firm supported by Saudi Aramco to sell its stake in a Silicon Valley AI chip business that is supported by Sam Altman, the co-founder of OpenAI.

Aramco's Prosperity7, which was the primary investor in the $25 million funding round for Rain AI, divested its stake in the business subsequent to an assessment by the Committee on Foreign Investment in the United States.

The Saudi fund was instructed to cancel the contract by the agency, which oversees U.S. dealings having potential impact on national security, at some point in the previous year.

The Committee on Foreign Investment in the United States (CFIUS) process is overseen by the U.S. Treasury, which stated: "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."

An interagency group called CFIUS examines foreign investments in American companies and real estate that may raise issues related to national security.

The US has taken steps that may hinder the Middle East's advancement of AI. The United States extended its ban on the sale of advanced Nvidia and Advanced Micro Devices artificial intelligence processors in August to a number of Middle Eastern nations.

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AI Chip Industry Dynamics

Rain is creating artificial intelligence that will drastically reduce the cost of AI. Artificial brains have the potential to become the main AI infrastructure and add a substantial amount of value to the AI stack in the long run.

However, Prosperity7 was compelled to renounce the agreement and distance itself from Rain Neuromorphics following a review by the Committee on Foreign Investment in the United States (CFIUS).

The United States is closely monitoring the activities of affluent Middle Eastern funds. They are growing increasingly wary of organizations that appear to have close links to China.

The market leader in AI chips is NVIDIA, although a number of international firms, such as Rain, are working to create chips that are more affordable and energy-efficient.

In an effort to stop China from obtaining sophisticated chips, the Biden administration only tightened its export regulations on the sale of advanced semiconductors last month. A few Middle Eastern nations are likewise subject to the limitations.

The advancement of AI technology depends on these chips. The news mainly affected companies like NVIDIA and AMD, who provide these processors to China. About a year had passed since the initial wave of semiconductor export controls.

This tightening of domestic regulations also brings to mind the Biden Administration's demand in March that ByteDance Ltd., the parent firm of TikTok, sell its shares or risk a potential nationwide ban.

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