Sam Alman, OpenAI & Saudi Arabia
The boomerang trajectory of Sam Altman, including his sudden departure and return over five days last week, flew past an as yet little reported reason why the OpenAI board may have been concerned about Altman’s degree of candor with them. On the other hand, they may have missed this issue entirely which is also a problem.
(12/01/23 — This report has been updated. See note at end of article.)
(01/21/2024) — This report has been updated. See note at end of article.)
Earlier this year Altman traveled to the Middle East meeting with officials from the Saudi Arabia sovereign wealth fund and other state owned enterprise investment organizations. His purpose was to solicit investors to help him build an AI semiconductor manufacturing plant that could produce a competitive line of AI specific computer chips to be a second source relative to products currently on the market including those from Nvidia and to possibly to produce a next generation of AI processors.
There is just one problem from a national security perspective that needs attention. The US has gone to great lengths to keep these kinds of chips out of the hands of China and Russia to prevent them from being used in weapons systems. Altman’s plan could open the door to them bypassing these restrictions.
How Saudi Arabia is Involved
Earlier this year a $25 billion dollar arms sale from US defense contractors to Saudi Arabia was put on ice because, as reported by the Wall Street Journal and other news sources, Saudi businessmen involved in the defense deal were revealed to be sharing information about it with their Chinese and Russian counterparts.
The report by Middle East Eye indicates, based in part on a WSJ article published 09/14/23, that the Saudi business interests created opportunities for Russian and Chinese nationals to obtain information on a $25 billion arms deal by Raytheon, now branded as RTX, to sell advanced US weapons systems to Saudi Arabia.
These actions, as reported, could have given Russia and China access to information on advanced US weapons, especially anti-drone radar, electronic warfare, and anti-missile systems. The implication is that the weapons or at least their designs, could be hijacked and used by Russian in the Ukraine war.
It is inconceivable that the Saudi business interests involved were acting without the knowledge of high level defense officials in the Saudi government. The Saudis involved must have been dreaming if they thought, on one hand, that they could let this happen, or worse, facilitated it, and, on the other, still prevail in getting US security assurances that include access to the latest high tech weapons.
As one sign of how bad the response is to this situation for the Saudis, not only did the mega billions arms deal go cold, but the WSJ also reports that the US retired military officers involved in the RTX contract resigned over the revelation that the Russians and Chinese had found their way into having access to information about the weapons deal through Saudi channels.
If Altman raised enough money from Saudi Arabia to build an AI chip fabrication plant in the Middle East, the threat to US national security is that the advanced AI chips produced by it could wind up in the hands of Chinese and Russian military forces.
If the Saudis agreed to put up billions for an AI Chip plan, it follows that one of the terms of the deal would be that the plant be built in Saudi Arabia as a key element of its future economy and to prevent any future disputes with the US, or anyone else, from cutting it off from the plant’s supply of semiconductors.
One aspect of the proposed defense deal included manufacturing US advanced weapons in Saudi Arabia. Altman’s plan to build a chip plant in Saudi Arabia would raise similar issues. The parallels in terms of risks to US national security are unmistakable.
If Altman’s deal with Saudi Arabia’s sovereign wealth fund to build and AI chip plant in the Middle East had gone through it could have produced serious blow back for OpenAI and possibly triggered a response from US government defense and national security agencies.
Where Was the OpenAI Board?
Altman’s AI chip venture in the Middle East should have been on the OpenAI board’s radar. Either Altman did not tell them about it, or there was complacency by the board about his outside investments, or both. How his trips to the Saudi Arabia and elsewhere didn’t get the board’s attention early on is also a question.
If the board wasn’t aware of the risks of Altman’s hunt for investors overseas, then the board’s charge that Altman was less than candid it begins to add a new element to it. It is unclear how far along Altman’s plans for the chip plant were, but in the normal course of events, the board should have been briefed on a plan for a capital investment of this magnitude sooner rather than later.
If the board was aware, and even if it was briefed, but their deliberations about it didn’t address the national security issues involved, then either the board itself had a blind spot about the problem or it simply failed to do the necessary due diligence to vet it.
It is also unclear whether Altman himself was aware of the expectations by the Saudis that if they funded his plant that they would want it built in their country, which in turn, opens a whole bunch of national security issues for the US. It is conceivable the both Altman and his board could have been sleepwalking into trouble without realizing it.
Why Didn’t Altman Seek Funding Under the 2022 Chips & Science Act?
Another question is why Altman didn’t pursue funding from the federal government under the 2022 Chips and Science Act that is providing funding for construction of new semiconductor plants in the US? (White House Fact Sheet) The act provides a astounding $280 billion in new funding to boost domestic research and manufacturing of semiconductors in the United States.
A short list of US firms taking advantage of it includes Micron which announced a $40 billion investment in memory chip manufacturing, critical for computers and electronic devices. The $20 billion Intel chip plant being built in Ohio is benefitting from funding under the act. Qualcomm and Global Foundries announced a new partnership that includes $4.2 billion to manufacture chips in an expansion of Global Foundries’ upstate New York facility.
Qualcomm, the leading semiconductor company in the world, announced plans to increase semiconductor production in the U.S. by up to 50 percent over the next five years based on funding under the Act. All of these new US based chip fabrication facilities will be in production in the next three to five years.
With all this federal money flowing into the US semiconductor industry, why didn’t Altman Altman make Washington DC his first stop rather than seeking investors overseas? Altman certainly could not get time to market production from a chip plant in Saudi Arabia any faster than in the US. So what was his compelling reason?
What is the Future of an OpenAI Chip Plant?
Altman is now back in the saddle at OpenAI with a friendly board of three, with other seats, including one for Microsoft, to be filled with people with commercialization of AI first and foremost on their minds.
Sooner or later the issue of having a second source of AI chips is going to be an issue for the firm and when that happens, it will likely have the capacity to attract investors to enable building its owns plant. Where it will be built and when and by who remains an open question.
US National Security Concerns and Regulation of AI
While Altman may still seek investors from nations with oil profits in sovereign wealth funds looking for a competitive return, even a “friendly” board at OpenAI will have to deal with US national security concerns about where the plant is built and who has access to the product.
The US government is considering how it will regulate AI. In a fact sheet released by the White House it included as a priority addressing the national security implications of AI software.
“ . . . In accordance with the Defense Production Act, the Order will require that companies developing any foundation model that poses a serious risk to national security, national economic security, or national public health and safety must notify the federal government when training the model, and must share the results of all red-team safety tests. These measures will ensure AI systems are safe, secure, and trustworthy before companies make them public.”
As they say in opera and in basketball, “it ain’t over until the fat lady sings.” Altman and his board have some time to make up their minds how they will deal with the government’s concerns. It is worth watching this space to see how things turn out.
Sooner or later OpenAI going to want a second source for AI chips. Whether Altman puts his bucket into the domestic well or not will depend on what kind of technology he wants and who can get it for him as fast as possible.
Update 12/01/23
Summary
The Biden administration has compelled a venture capital firm owned by Saudi Arabia’s Aramco, Prosperity7, to divest its shares in Rain AI, a Silicon Valley AI chip startup supported by Sam Altman, co-founder of OpenAI.
The sale comes after a review conducted by the Committee on Foreign Investment in the United States (CFIUS), the principal US watchdog overseeing deals with potential national security implications.
Full text of the media reports
President Biden-led US govt forces VC backed by Saudi govt to pull out of Sam Altman’s AI chip startup
Update 01/21/24
Reuters: Sam Altman seeks to raise billions for network of AI chip factories
Summary
OpenAI CEO Sam Altman plans to use the billions of dollars he is trying to raise for a chip venture for setting up a network of factories that will manufacture semiconductors. Abu Dhabi-based G42 and Japan’s SoftBank Group, are among the firms that have held discussions with the OpenAI boss. The talks with G42, with which the ChatGPT maker partnered in October last year, alone had focused on raising $8 billion to $10 billion.
# # #
Questions or comments can be emailed to: neutronbytes@gmail.com
