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EU AI Act Comes into Effect: Impact on U.S. Tech Firms

Updated: Aug 2

The EU AI Act is now in effect, regulating AI development and application. U.S. tech giants face increased scrutiny and potential fines under the new regulations. Generative AI models must comply with strict requirements outlined in the AI Act.

EU AI Act
Credit: REUTERS

The European Union's groundbreaking artificial intelligence law, known as the AI Act, has officially been implemented, bringing significant changes for American tech giants. After receiving final approval from EU member states, lawmakers, and the European Commission, the law has now come into force, four years after its initial proposal.


The AI Act is a pivotal piece of EU legislation designed to regulate the development, use, and application of AI technologies. It aims to address the potential negative impacts of AI and establish a comprehensive regulatory framework across the EU. The law primarily targets major U.S. technology companies, which are at the forefront of developing advanced AI systems.


Under the AI Act, various businesses, not just tech firms, will fall under the regulatory scope. The legislation adopts a risk-based approach to AI regulation, meaning different applications of AI will be regulated based on the level of risk they pose to society. High-risk AI systems, such as autonomous vehicles and medical devices, will face stringent obligations, including thorough risk assessment, bias mitigation measures, and transparency requirements.


U.S. tech giants like Microsoft, Google, Amazon, Apple, and Meta have heavily invested in AI technologies and partnerships. Cloud platforms such as Microsoft Azure and Amazon Web Services play a crucial role in supporting AI development due to the substantial computing infrastructure required. Consequently, these tech firms are expected to be among the primary targets under the new regulations.


The AI Act extends its reach beyond the EU, applying to any organisation with operations or impact within the EU. This broad scope will subject tech giants to increased scrutiny regarding their activities in the EU market and their handling of EU citizen data.


Generative AI, categorised as "general-purpose" AI under the AI Act, includes AI models like OpenAI's GPT and Google's Gemini. The legislation imposes strict requirements on these models, such as compliance with EU copyright laws, transparency in training methods, and robust cybersecurity measures.


Breaching the AI Act could result in substantial fines for companies, ranging from 35 million euros ($41 million) to 7% of their global annual revenues. The penalties will vary based on the severity of the infringement and the size of the company. Oversight of AI models falls under the European AI Office, established as a regulatory body to monitor compliance.

 
  • The EU AI Act is now in effect, regulating AI development and application.

  • U.S. tech giants face increased scrutiny and potential fines under the new regulations.

  • Generative AI models must comply with strict requirements outlined in the AI Act.


Source: CNBC

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