Dec 7 (Reuters) - The U.S. government has approved the

export of advanced artificial intelligence chips to a

Microsoft ( MSFT )-operated facility in the United Arab Emirates as part

of the company's highly-scrutinized partnership with Emirati AI

firm G42, Axios reported on Saturday, citing two people familiar

with the deal.

Microsoft ( MSFT ) invested $1.5 billion in G42 earlier this year,

giving the U.S. company a minority stake and a board seat. As

part of the deal, G42 would use Microsoft's ( MSFT ) cloud services to

run its AI applications.

The deal, however, was scrutinized after U.S. lawmakers

raised concerns G42 could transfer powerful U.S. AI technology

to China. They asked for a U.S. assessment of G42's ties to the

Chinese Communist Party, military and government before the

Microsoft ( MSFT ) deal advances.

The U.S. Commerce Department and G42 did not immediately

respond to Reuters' requests for comment. Microsoft ( MSFT ) declined to

comment on the report.

The approved export license requires Microsoft ( MSFT ) to prevent

access to its facility in the UAE by personnel who are from

nations under U.S. arms embargoes or who are on the U.S. Bureau

of Industry and Security's Entity List, the Axios report said.

The restrictions cover people physically in China, the

Chinese government or personnel working for any organization

headquartered in China, the report added.

U.S. officials have said that AI systems could pose national

security risks, including by making it easier to engineer

chemical, biological and nuclear weapons. The Biden

administration in October required the makers of the largest AI

systems to share details about them with the U.S. government.

G42 earlier this year said it was actively working with U.S.

partners and the UAE's government to comply with AI development

and deployment standards, amid concerns about its ties to China.

Abu Dhabi sovereign wealth fund Mubadala Investment Company,

the UAE's ruling family and U.S. private equity firm Silver Lake

hold stakes in G42. The company's chairman, Sheikh Tahnoon bin

Zayed Al Nahyan, is the UAE's national security advisor and the

brother of the UAE's president.