We host the chips.
We don’t write the rules.

A clip about the US–China tech war came across my feed calling this the sharpest knife yet. The framing was slightly off, but the instinct was right — and the part nobody in the comments noticed is that Malaysia is named in this story, not watching it.

The loophole, in one paragraph

Washington restricted the sale of advanced AI chips to China. Chinese firms responded with the obvious workaround: do not import the chip — rent it where it already sits. Reporting names ByteDance, Alibaba and Tencent accessing Nvidia compute remotely through data centres in Malaysia, Thailand and Japan.

The racks stay in Johor. The workload arrives from Shenzhen. Nothing crosses a border except packets, so no export takes place, so no rule is broken. An export-control regime built for shipping containers met a product delivered by wire.

The door is closing

The instrument is the Remote Access Security Act, which passed the US House of Representatives 369 to 22 on 12 January 2026 — a margin that tells you how little disagreement there is about the principle. It extends export controls to cloud services for the first time, closing the gap that let restricted chips be rented offshore lawfully.

To be accurate about status: it has not passed the Senate. This is a near-unanimous signal, not yet law.

The logic is difficult to argue with. It is incoherent to forbid selling a chip while permitting anyone to use that same chip by the hour over a wire. If compute is the strategic asset, then access to compute is the thing you actually have to control — and this year already showed how fast that can happen. In June, Washington placed two of Anthropic’s frontier models under export control, and access was switched off for customers worldwide within a day, on the strength of a letter. A shipment takes weeks to stop. An account takes minutes.

Malaysia locked it first

Here is the part that got almost no local attention. Malaysia did not wait to be forced.

Under Directive 1/2025, in force since July last year, the export, transshipment or transit of US-origin high-performance AI chips — GPUs, TPUs, AI accelerators — requires a Strategic Trade Permit. The process carries a 30-day notice period and an AI Chip Assessment form submitted to MITI, and the application must include a re-export licence from the country of origin plus an export-control classification from the manufacturer. The stated purpose was to close the gap that may have allowed foreign-based subsidiaries of Chinese firms to reach Nvidia’s newest processors.

Read that as a business document rather than a diplomatic one. Malaysia now administers another country’s export-control list as a condition of hosting the hardware. And it did so a full year before the American bill cleared a single chamber, which tells you where the pressure was actually applied.

The question nobody asks at the ribbon-cutting

I wrote a few days ago that Malaysia won the data-centre wave on geology rather than policy — no earthquakes, no typhoons, cheap power, flat land beside Singapore. That argument now has a sharper edge.

Some meaningful share of the demand filling those halls is arbitrage demand: customers who are there precisely because they cannot get compute at home. That is exactly the customer this legislation is designed to remove. Nobody publishes the split, and I am not going to pretend I know it — but the question is not academic, because the two kinds of tenant behave completely differently when the rules change.

Real demand renews. Arbitrage demand relocates. And when it relocates, the building stays, the power contract stays, and the silicon keeps depreciating on its two-to-three-year clock whether or not anyone is renting it. That is the whole risk in one sentence: racks cannot move, but tenancy can.

Whose rulebook

Strip away the geopolitics and a plain commercial fact remains. We accepted a rulebook we do not write, to host assets we do not own, serving demand we do not control.

That is not an outrage — it is a trade, and every jurisdiction that wants US technology makes the same one. But a trade should be entered with open eyes, and celebrated in proportion. When the announcements count megawatts and approved investment while the dependency goes unmentioned, we are counting announcements again instead of counting exposure.

What Europe did instead

There is another answer to the same problem, and it deserves study precisely because it is the opposite of ours.

In May 2025, Microsoft blocked the email account of Karim Khan, Chief Prosecutor of the International Criminal Court, in compliance with US sanctions against the court. Microsoft disputes the framing — it says the ICC had already moved the account elsewhere — but it has never disputed the load-bearing part: it complies with US legal obligations.

That single incident did more for European digital sovereignty than a decade of policy papers, because it converted an abstract worry into a demonstrated capability. Not a hack. Not an outage. An international institution switched off by a legal instruction issued in a country that was not its own.

What followed was not a statement. It was a migration. Denmark’s digital ministry moved its staff off Microsoft 365. Schleswig-Holstein is moving 30,000 government employees off the entire Microsoft stack, with roughly 80% of workstations done by early this year. Bavaria cancelled a planned Microsoft framework agreement. France ordered 2.5 million civil servants off Teams and Zoom onto a French platform running on national infrastructure by 2027, with Linux migrations behind it. And in January the European Parliament voted 471 to 68 for a technological sovereignty resolution.

Notice the shape of it. Europe read the same risk we did and chose to pay to leave. We chose to comply in order to stay.

Now the part the viral version of this story always omits. The alternatives are free to download; the migration is not free at all. Schleswig-Holstein has been at this for years and is still not finished. The bill is not licences — it is retraining, rewriting, integration, and absorbing the productivity dip while thousands of people relearn their jobs. A government can carry that. That is exactly why most companies cannot.

Which leaves the asymmetry that actually matters. Europe can afford to leave. Malaysia could not, so it complied. And the ordinary business can do neither — no leverage to negotiate, no budget to migrate, no ministry to write a directive on its behalf. At every level, sovereignty turns out to be a luxury good.

Why I think this is mostly theatre

Now my honest read, and it is less flattering than the policy language: I do not think this works. Not because the intent is wrong, but because I count three doors and nobody has closed any of them.

Door one: you cannot force the landlord to interrogate the tenant. A data centre sells capacity. Asking every operator to establish the true beneficial control behind every account is asking a landlord to run an intelligence service. A few will do it properly. Most will do the paperwork.

Door two: add a layer. A company is incorporated here. It buys the compute. On every document it is Malaysian. Whatever relationship exists upstream sits in contracts nobody at the data centre will ever read.

Door three — and this is the one I see no answer to: do not consume the compute at all. Buy the output. Commission the work to a local firm. That firm runs it here, lawfully, on compute it is fully entitled to use. Then it delivers the result. The controlled thing was access. The valuable thing was the answer — and the answer travels as a file.

That third door is why I cannot take this seriously as a barrier. You can regulate who touches the machine. Regulating who benefits from what the machine produced is a different problem, and I have not seen a workable proposal for it.

Where I check my own cynicism: leaky is not the same as useless. Every layer of intermediation costs money, time and deniability — and the strongest deterrent is not the law at all. It is that an operator caught hosting the wrong tenant risks its entire chip allocation, which is a commercial death sentence, and that disciplines anyone with something to lose far better than a fine does.

So the honest position is not that nothing works. It is that this is a toll on a road that stays open.

To be fair

Three honest counterweights.

The bill is not law yet, and a near-unanimous House vote is not the same as a statute. Second, not all of the demand is arbitrage: Microsoft alone bought roughly 370 acres in Johor, and Southeast Asian domestic demand is real and growing fast. Third, Malaysia’s directive is defensible on its own terms — a country that wants to stay inside the supply chain of advanced computing has to demonstrate it can be trusted with it, and moving early is better than being forced late.

Nothing here says the data-centre wave was a mistake. It says the wave has a condition attached, and the condition is written elsewhere.

The bottom line

For business owners the lesson generalises far past data centres, because most of us are running some version of the same arrangement — a critical capability we rent, governed by rules made in a room we will never enter.

Know whose rulebook your infrastructure actually runs on. Ask what happens to your operation the day access is withdrawn by someone who does not know your company exists. Then build the answer before you need it, because the one thing this year has proven repeatedly is that access can be revoked faster than it can be replaced.