The New York Times reports that U.S. officials are worried the deal could boost Chinese AI capacity, spread censored chatbots, and deepen Apple's exposure to Beijing's data and censorship laws.

U.S. officials have begun scrutinizing Apple's (AAPL) deal with Alibaba (BABA) for artificial intelligence services on Apple devices in China, the New York Times reported.

The partnership, announced in February, is a crucial move for Apple as it navigates challenges in China, the world's largest market for smartphones and gadgets.

Since OpenAI doesn't operate in China, Apple needed a local partner to stay competitive. In recent years, delays in rolling out AI features have cost Apple ground to fast-growing Chinese brands like Huawei and Xiaomi.

Now, the White House and congressional officials are scrutinizing those plans, according to the NYT report, which cited three people familiar with the deliberations.

U.S. officials are reportedly worried that the partnership could enhance a Chinese firm's AI capabilities, expand the influence of Chinese chatbots constrained by censorship, and increase Apple's vulnerability to Chinese regulations on censorship and data sharing.

Apple spoke to several Chinese tech companies before striking a deal with Alibaba, and earlier this year, it asked Chinese regulators to approve those AI features, according to the report.

Apple has not provided an update on when the AI features will become available on its iPhones in China.

If the deal collapses, it might have significant consequences for Apple, which is struggling with mistakes and delays in its AI strategy.

Apple missed its deadline for rolling out several AI functionalities, including a revamped Siri assistant, and replaced the head of AI and machine learning in March.

Apple will present product and software updates at its WWDC event next month.

On the other hand, Alibaba is on a roll with several new AI launches this year, which are supporting its earnings and stock. Global observers are paying attention to China's AI capacity growth, especially after DeepSeek developed a benchmark AI model at a fraction of the cost of Western models.

Apple shares are down 15.6% this year, and Alibaba's U.S.-listed shares are up 46.8%.

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