Top executives at Microsoft are reportedly debating whether the company should continue its operation in its AI lab in China. Wikimedia Commons

As tensions between the United States and China rise, Microsoft executives are reportedly debating whether the company should continue running its operations in the AI lab in Beijing.

The US and China have been sparing no effort to be a major force in the technology landscape, and now both nations are engaged in a fierce battle for AI supremacy.

Microsoft extended its partnership with American AI startup OpenAI through a multibillion-dollar deal last year to be at the forefront of the AI space. The Redmond-based tech giant launched an advanced research lab in Beijing back in 1998 to tap into China's talent for facial recognition and AI.

This research played a key role in the development of AI chatbots like Microsoft Copilot and OpenAI's ChatGPT. So, the Beijing-based AI lab has understandably gained a lot of importance.

Last year, US President Joe Biden issued an Executive Order that raised concerns about AI technology's safety and security. It also placed guardrails on the technology to ensure it does not get out of control.

A new report by The New York Times claims Microsoft's top executives including CEO Satya Nadella and President Brad Smith are currently grappling with the future of the AI lab.

Will the US-China rivalry affect Microsoft's advance in the AI space?

Last month, US lawmakers warned Microsoft against its ongoing work in China after the company's President Brad Smith met with China's Minister of Commerce Wang Wentao to discuss AI, economic cooperation and trade relations between the two countries.

During his low-key visit to China, Smith said Microsoft is willing to "actively participate in the digital transformation of China's economy," CNBC reported.

Rep. Mike Gallagher (R-Wis.), chairman of the House Select Committee on China, told Microsoft that the CCP "will use AI for evil techno-totalitarian purposes". Similarly, Sen. Josh Hawley (R-Mo.) urged Congress to "block partnerships like this".

The US government noted that the Executive Order, which prevents chip makers like NVIDIA from shipping CPUs to China, is designed to control the use of AI rather than run-down China's economy.

Microsoft is also facing a lot of pressure from US officials regarding the viability of its Beijing-based AI lab, which is still operational.

Asserting the company's commitment to the research lab, Microsoft Research's lead Peter Lee said: "We are as committed as ever to the lab and the world-class research of this team."

"There has been no discussion or advocacy to close Microsoft Research Asia, and we look forward to continuing our research agenda," the top executive added.

It is worth noting that China accounted for up to 1.5 per cent of Microsoft's sales, which translates to $212 (about £167.17) billion. Stock analysts believe Microsoft was able to surpass Apple as the world's most valuable company due to its heavy investment in generative AI, which has attracted more investors to the company.