An eleventh-hour move by the Biden administration to regulate how American AI technology is shared with the world is coming under fire from the nation’s tech sector.

According to the White House, the interim final rule on artificial intelligence deployment (IFR) streamlines licensing barriers for both large and small chip orders, strengthens US AI leadership and provides clarity to allied and partner nations on how they can benefit from AI. It added that it is building on previous chip checks by curbing smuggling, closing other loopholes and raising AI security standards.

The new rule is needed, it insisted, “(to improve U.S. national security and economic strength).

“(I)t is imperative that we not offshore this critical technology and that the world’s AI runs on American rails,” it asserted. “It is important to work with AI companies and foreign governments to establish critical security and trust standards as they build out their AI ecosystems.”

Stephen Kowski, Field CTO of SlashNexta computer and network security company in Pleasanton, California, explained that the rule seeks to strike a necessary balance between protecting advanced AI capabilities and maintaining technological leadership.

“Given the increasing sophistication of cyber threats and potential misuse of AI systems, securing AI infrastructure and computing resources is critical,” he told TechNewsWorld. “Strong controls on AI chip export can help prevent advanced capabilities from being used in ways that could compromise security or enable malicious activity.”

“Fundamentally, economic innovation and national security are intertwined,” added Jeff Le, VP of Global Government Affairs and Public Policy at Security scorecarda cybersecurity rating company in New York City.

“The global competition over procurement and computing is key to continued progress in the AI ​​race and crucial to surpassing China’s ambitions,” he told TechNewsWorld. “There have been connections to concerns about the Chinese back end and digital vulnerabilities that exist for US data and IP. Reducing the interdependence serves as an essential national security requirement and also allows us to strengthen our supply chains, which represent significant vulnerability, as seen by China’s saber-rattling on Taiwan.

Derail economic growth

Critics of the rule, which will take effect in 120 days, argue it will do more harm than good.

“Today, companies, startups and universities around the world are using mainstream AI to advance healthcare, agriculture, manufacturing, education and countless other fields, drive economic growth and unlock the potential of nations,” Ned Finkle, VP of Government Affairs at Nvidia , a major maker of chips used for AI applications, wrote in a company blog.

“Building on American technology, the adoption of AI around the world is promoting growth and opportunity for industries at home and abroad,” he continued. “That global progress is now in jeopardy. The Biden administration is now seeking to limit access to mainstream computing applications with its unprecedented and misguided ‘AI Diffusion’ rule, which threatens to derail innovation and economic growth worldwide.

“In its final days in office, the Biden administration is seeking to undermine America’s leadership with a regulatory quagmire of more than 200 pages, drafted in secret and without proper legislative review,” he argued. “This sweeping overreach would impose bureaucratic control over how America’s leading semiconductors, computers, systems and even software are designed and marketed worldwide.”

“And by trying to direct market outcomes and stifle competition — the lifeblood of innovation — the Biden administration’s new rule threatens to squander America’s hard-won technological advantage,” he argued.

“While cloaked in the guise of an ‘anti-China’ measure, these rules will do nothing to improve American security,” he added. “The new rules will govern technology worldwide, including technology that is already widely available in mainstream gaming PCs and consumer hardware. Rather than mitigating any threat, the new Biden rules will only weaken America’s global competitiveness, undermining the innovation America has stood for.”

Policy gaps could undermine US AI leadership

Daniel Castro, vice president of the Information Technology and Innovation Foundation, a research and public policy organization in Washington, DC, argued that the IFR raises serious concerns about its potential impact on US competitiveness, global AI leadership and international alliances.

“By pushing other nations to choose between the United States and China, the administration risks alienating key partners and strengthening China’s position in the global AI ecosystem,” he said in a statement.

“Faced with such an ultimatum, many countries may choose to side with providing them with uninterrupted access to the AI ​​technologies essential to their economic growth and digital future – and currently only one country is threatening to cut them off from these technologies .”

Additionally, Castro added, the IFR’s narrow focus on regulating closed-weight AI models while leaving open-weight equivalents unaddressed creates a glaring and counterproductive imbalance.

“U.S. companies developing proprietary AI models will face strict regulatory burdens that foreign competitors can evade by using open-source alternatives,” he explained. “This policy undermines American firms in the global marketplace and fails to meaningfully reduce the risks the regulation purports to address.”

“Instead of strengthening national security or protecting American technological leadership, the administration’s approach risks enabling competitors to accelerate their progress and surpass the United States in this important area,” he argued.

“The administration’s initial restrictions on chip exports were wrong, and the IFR compounds this misstep,” he added. “Instead of correcting course, the administration continues counterproductive policies that undermine American leadership in AI while giving adversaries a clearer path to dominance. The United States should work to solidify its position as the world leader in AI by fostering innovation, strengthening alliances, and ensuring the broad availability of American technology to legitimate users worldwide.”

“A strategy rooted in competitiveness — not containment — will best serve America’s interests in the digital economy of the future,” Castro insisted.

Short term gains, long term losses

While agreeing with the underlying goals of the IFR, University of Pennsylvania Professor of Engineering Benjamin Lee disagree with the approach taken to pursue those goals. “Maintaining US leadership in artificial intelligence — both the hardware architectures and the software models — is essential to national security and economic strength,” he told TechNewsWorld.

However, Lee pointed out that US leadership means his companies are building a hardware and software ecosystem that forms the foundation for global AI computing. “While administration decisions and export controls may produce a narrow, short-term benefit, they may cause a broader long-term loss to American technological leadership,” he said.

“In the short term, export controls will slow some countries’ deployment of the most advanced GPUs and the largest AI data centers,” he explained. “But in the long run, export controls will cause other countries to develop their own hardware architectures or software models.”

“Much of this technology relies on openly published resources or code, which lowers barriers to building alternatives to American technology, if needed,” he continued. “Export controls may also give the United States less visibility into the technological state-of-the-art in other countries.”

“Ten years ago, similar export controls on Intel CPUs aimed at slowing Chinese growth in high-performance scientific computing led to an explosion of computer engineering in China,” he added. “American experts now have less visibility into the condition of Chinese supercomputers.”

Unintended consequences of AI inclusion policies

The IFR is trying to establish “inclusion” at the national level, said Rob Enderle, president and chief analyst of the Enderle Groupa consulting services firm in Bend, Ore.

“While lock-in – the practice of forcing customers to use only your technology – can work over a short period of time, as IBM has demonstrated for several decades, it can also create a trend away from your technology, which also involves IBM happened and can now happen to the US,” he told TechNewsWorld. “This move, while tactically sound, is strategically suicidal for US AI technology in the long run.”

“I think the rule was well-intentioned but poorly thought out by people who either don’t understand the technology or the market in which the technology operates,” he added. “This would likely harm US AI interests and security in the long term in exchange for dubious short-term benefits, leaving US companies unable to compete with their foreign counterparts at a time when US technology is superior and ensuring that it won’t be like that long-term.”

“China’s capabilities are increasing faster than the US’s, mainly due to the fact that China’s government is taking a much more aggressive stance to help with technological advancement,” Enderle said. “If the US does not respond appropriately, the technology market will follow oil, trains, electronics and cars to other countries, most likely China.”

Kris Bondi, CEO and co-founder of Mimotoa threat detection and response company in San Francisco, added that one of the most frustrating things about decrees from any administration is that they tend to be all or nothing. “Regulations are needed, but they have to be about access, monitoring and the use of AI,” she told TechNewsWorld.

“While I agree that the use and protection of AI is critical to US national security and economic strength, this form of isolationism will undermine innovation,” she said. “Not all progress is produced on American soil. Instead of protecting, the bubble this rule will create will limit the ability of the US to develop and compete on a global scale.”