(Bloomberg) -- The Biden administration has forced a Saudi Aramco venture capital firm to sell its shares in a Silicon Valley AI chip startup backed by OpenAI co-founder Sam Altman, an exit that could have broader implications for the Middle Eastern country’s growing investments in US technology.

Prosperity7, a lead investor in a funding round that raised $25 million for Rain AI in 2022, sold its shares in the startup after a review by the Committee on Foreign Investment in the United States, people familiar with the matter said. The agency, the primary US watchdog for deals with national security implications, instructed the Saudi fund to unwind that deal sometime over the past year, the people said, asking to remain unidentified because the information is private.

The US is heightening scrutiny over the activity of Middle Eastern wealth funds, part of a growing resistance toward entities regarded as having close ties with China. CFIUS is reviewing several multibillion-dollar deals this year on concerns they could pose national security risks, Bloomberg News has reported.

Rain AI, partly financed by Altman, is a startup that designs AI chips inspired by the way the brain works. Prosperity7 sold its stake in the firm to Silicon Valley investment firm Grep VC, according to data firm PitchBook. Altman, Rain, Prosperity7 and Grep VC did not reply to requests for comment. CFIUS said in an emailed statement it couldn’t comment on transactions it’s reviewing but that it’s “committed to taking all necessary actions within its authority to safeguard U.S. national security.”

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Beijing has sought to strengthen ties with the Middle East while tensions escalated with the US and Europe. In November, China and Saudi Arabia signed a local-currency swap agreement worth around $7 billion. Saudi Aramco, which controls Prosperity7, has invested billions of dollars in China’s energy sector even as the kingdom tries to attract Chinese tech companies.

The selloff by Prosperity7 — a $1 billion venture capital fund owned by Aramco Ventures — is notable because of the White House’s campaign to contain China’s technological ascendancy. That endeavor is focused in particular on the semiconductors that will drive future innovations including artificial intelligence.

Still, Altman is working to raise billions of dollars for a new AI chip venture to compete with Nvidia Corp. and had traveled to the Middle East to fundraise for a project codenamed Tigris, Bloomberg News reported this month. It wasn’t clear whether Rain AI is connected to that effort and its technology is still at an early stage of development.

While the market for AI chips is dominated by Nvidia, Rain AI and Altman join dozens of startups from Asia to Europe looking to design chips that could prove cheaper and more energy efficient. The US has banned the sales to China of the highest-performance chips required to develop the next generation of AI services, hamstringing China’s ambitions to compete in the burgeoning sphere.

With the advent of OpenAI’s ChatGPT, there has been concern about how data centers creating large AI models are overly power hungry. Rain AI and other so-called in-memory chip startups aim to reconfigure how data is processed so as to reduce the need for transfers and cut power consumption.

While Altman is an early investor in Rain AI, it’s not clear whether he remains active in the company or how he views the technology today.

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--With assistance from Rachel Metz, Ben Bartenstein and Mackenzie Hawkins.

©2023 Bloomberg L.P.