AI Policy, Chips, & China: What Investors Need to Know

Outside of the Federal Reserve and trade, nothing is likely to impact the US economy and stock market more than the artificial intelligence (AI) revolution. As such, whether one is a tech investor or not, the industry is worth watching. With so much going on in the industry from a regulatory, investment, and international perspective, it’s worth taking some time to track the latest headlines. Below are three of the most impactful AI headlines this week:

Trump Executive Order: One Rule Book for AI

One of the benefits under the Tenth Amendment of the United States Constitution is that “all powers not granted to the federal government are reserved for the states and the people.” In other words, because the United States is diverse, states have autonomy from the Federal government over issues such as health, public safety, and education. However, in certain instances, like AI, the federal government must take control, as without one rule book, regulations become too cumbersome, unrealistic, and anti-innovation. For this reason, on Monday, the Trump Administration announced plans for an executive order next month seeking to create a national AI rule.

In a lengthy social media post, “AI Czar” David Sacks presented the logic behind the executive order decision. Below is an excerpt:

“When an AI model is developed in state A, trained in state B, inferenced in state C, and delivered over the internet through national telecommunications infrastructure, that is clearly interstate commerce, and exactly the type of economic activity that the Framers of the Constitution intended to reserve for the federal government to regulate. In the absence of preemption, 50 different states will assert their jurisdiction, creating a patchwork of 50 different regulatory regimes, often in contradiction with each other. Indeed this is already happening. Over 1,200 bills have been introduced in state legislatures, and over 100 measures have already passed.”

For US stock market and AI bulls, it is absolutely critical that this bill passes. If US AI firms are bogged down by 50 different sets of rules, competing with cutthroat competition like China seems highly unlikely.

Nvidia Reportedly Allowed to Sell H200s to China

Nvidia (NVDA), which designs the most powerful AI chips worldwide, has been caught in the middle of trade tensions between the United States and China. However, after cooling tensions between the two economic rivals and several meetings, the US Commerce Department is reportedly prepared to permit the sale of NVDA H200s to China.

China hawks argue that by selling powerful AI chips to China, the US risks China becoming too powerful militarily. Conversely, proponents of a more open market suggest that China will get their hands on these chips through backdoor means or eventually catch up to Nvidia’s groundbreaking technology.

Baidu Rises on Reports of AI Chip Spin-Off

Baidu (BIDU), the ‘Google of China,’ is up ~10% over the past two sessions after a report suggested that the Chinese tech giant may spin off and IPO its Kunlun AI chip unit. Today, Citi (C) reiterated its buy rating and $181 price target for the stock.

Bottom Line

As the AI landscape shifts by the week, these developments highlight how intertwined technology has become with policy, trade, and global competition. From potential federal regulation to semiconductor diplomacy and strategic corporate restructuring, AI’s trajectory will have sweeping implications for markets and innovation.

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This article originally published on Zacks Investment Research (zacks.com).

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