Alphabet Inc's Google (NASDAQ:GOOGL) and Microsoft Corp (NASDAQ:MSFT) are reportedly providing Chinese companies access to Nvidia Corp (NASDAQ:NVDA) AI chips through data centers outside China, The Information reports.

The move comes as the current Biden administration imposes restrictions to prevent Chinese firms from utilizing U.S. technology for artificial intelligence, particularly advanced semiconductors.

The U.S. has informed allies that it is considering the strictest trade measures available if crucial chipmaking machinery providers continue with their business relations with China.

The Biden administration has asked cloud companies to scrutinize whether foreign entities are using U.S. data centers to train AI models.

According to the report, Microsoft provides server rental services, including those equipped with Nvidia's A100 and H100 chips, to Chinese customers through data centers located outside China.

Similarly, Google allows Chinese customers to use servers based outside mainland China and ensures that its services comply with U.S. export controls.

Before U.S. export controls, China accounted for more than a quarter of Nvidia's total revenues.

It is to be noted that despite the severe trade curbs, Nvidia is on track to sell $12 billion of artificial intelligence chips in China this year.

It is also reported that Nvidia's advanced AI chips are smuggled into China despite U.S. export restrictions.

An estimate suggests about 12,500 AI chips are smuggled annually, while Nvidia sold over 2.6 million A100 and H100 chips globally last year.

Google and Microsoft maintain that their operations adhere to current U.S. regulations, providing Chinese companies with essential AI capabilities while navigating the complexities of international trade restrictions.

Price Action: GOOGL shares are trading lower by 1.63% at $180.93 at the last check on Wednesday.