The Trump administration is reportedly drafting a ban that would prevent data centers from using the Chinese version of a critical transmission part, citing concerns over digital espionage and intellectual property theft.

The planned ban, which officials hope will be enacted before year-end, would technically ban all transceiver imports but would exempt many non-Chinese suppliers from the new rule, according to Reuters.

A ban on Chinese transponders could increase costs for U.S. tech giants like Amazon, Microsoft, Meta and Google, which are together spending trillions of dollars building out new artificial intelligence infrastructure.

Major tech firms already raised capital expenditure projections in recent weeks due to the rising cost of GPUs and other processors needed for AI computing. Now, a ban on Chinese transponders would force them to switch to higher-cost American producers.

The restrictions are intended to protect the infrastructure underpinning AI amid the administration’s concerns that Chinese devices are being used to steal data, install malware or potentially disrupt operations at U.S. data centers, Reuters reported.

These fears come as the U.S. is locked in a race for AI supremacy with China. At the same time, data centers are emerging as an increasingly prominent security vulnerability and military target, with Iran repeatedly targeting data centers of U.S. firms with drone strikes in its ongoing conflict with the U.S. and Israel.

"Transceivers definitely ⁠pose a risk," Divyansh Kaushik, an AI policy expert at advisory firm Beacon Global Strategies, told Reuters.

"As the data center buildout scales up, you want to make sure the ​data center supply chain is secure from the get-go," he added.

This is not the first time the Trump administration has moved to limit China’s role in the United States' technology supply chain. Since December, the FCC has imposed similar restrictions on the import of Chinese routers, robots, drones and inverters.

Officials hope to avoid the kind of integration into U.S. tech infrastructure achieved by Chinese firm Huawei, which the White House has accused of state-sponsored spying and intellectual property theft.

The Chinese embassy in Washington lashed out at the proposed transponder ban, telling Reuters that the U.S. should "heed the objective and rational voices of the business communities in both countries" and "stop smearing Chinese companies and threatening them with sanctions."