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As AI booms, fear spreads that Biden is undercutting U.S. industry

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America’s artificial intelligence corporate sector is alive and thriving, but many in the tech trenches are expressing mounting concern that President Biden and his team are out to kill the golden goose in 2024.

AI makers are beginning to grumble about Mr. Biden’s sweeping AI executive order and his administration’s efforts to regulate the emerging technology. The executive order, issued in late October, aims to curtail perceived dangers from the technology by pressuring AI developers to share powerful models’ testing results with the U.S. government and comply with various rules.

Small AI startups say Mr. Biden’s heavy regulatory hand will crush their businesses before they even get off the ground, according to In-Q-Tel, the taxpayer-funded investment group financing technology companies on behalf of America’s intelligence agencies.



China and other U.S. rivals are racing ahead with AI-subsidized sectors, striving to claim market dominance in a technology that some say will upend and disrupt companies across the commercial spectrum.

Esube Bekele, who oversees In-Q-Tel’s AI investments, said at the GovAI Summit last month that he heard startups’ concerns that Mr. Biden’s order may create a burden that will disrupt competition and prove so onerous that they could not survive.

“There is a fear from the smaller startups,” Mr. Bekele said on the conference stage. “For instance, in the [executive order], it says after a certain model there is a reporting requirement. Would that be too much?”


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The reporting requirements outlined in the executive order say the secretaries of commerce, state, defense and energy, along with the Office of the Director of National Intelligence, will create technical conditions for models and computing clusters on an ongoing basis. The order specifies various levels of computing power that require disclosures until the government issues additional technical guidance.

Mr. Biden said “one thing is clear” as he signed the executive order at the White House: “To realize the promise of AI and avoid the risks, we need to govern this technology.” He called the order “the most significant action any government anywhere in the world has ever taken on AI safety, security and trust.”

The R Street Institute’s Adam Thierer said the executive action tees up a turf war in the administration for AI policy leadership. He said he is not sure who will prevail but much AI regulation will now be created away from public view.

Mr. Thierer, a senior fellow on R Street’s technology and innovation team, foresees a tsunami of regulatory activity on AI.

“So much AI regulation is going to happen off the books,” Mr. Thierer said. “It’s going to be in the so-called soft-law arena, soft-power area, through the use of jawboning, regulatory intimidation and sometimes just direct threats.”

Concerns across the board


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The little guys are not the only ones afraid of Mr. Biden’s regulations and shadow pressure.

Nvidia and other major players have had a glimpse of the Biden administration’s plans and don’t like what they see.

Santa Clara, California-based Nvidia joined the trillion-dollar market capitalization club in May as businesses rushed to acquire its chips for various AI technologies involving medical imaging and robotics.

Yet the Commerce Department’s anticipated restrictions on Nvidia’s sales to China, in light of security concerns, triggered a stock plunge that jeopardized billions of dollars in expected sales.

Commerce Secretary Gina Raimondo knows her team’s restrictions will hurt technology companies but said she is moving ahead because of national security.

Speaking at the Reagan National Defense Forum in California last month, Ms. Raimondo said she told the “cranky” CEOs of chip manufacturers that they might be in for a “tough quarterly shareholder call,” but she added that it would be worth it in the long run.

“Such is life. Protecting our national security matters more than short-term revenue,” Ms. Raimondo said.

Reflecting rising divisions in the exploding marketplace, some technology companies support new regulations. They say they prefer bright legal lines on what they can and cannot do with AI.

Large companies such as Microsoft and Google called for regulations and met with Mr. Biden’s team before the executive order’s release. Microsoft has pushed for a federal agency to regulate AI.

Several leading AI companies voluntarily committed to Mr. Biden’s team to develop and deploy the emerging technology responsibly. Some analysts say the established, well-heeled corporate giants may be better positioned to handle the coming regulatory crush than their smaller, startup rivals.

“The impulse toward early regulation of AI technology may also favor large, well-capitalized companies,” Eric Sheridan, a senior equity research analyst at investment banking giant Goldman Sachs, wrote in a recent analysis.

“Regulation typically comes with higher costs and higher barriers to entry,” he said, and “the larger technology companies can absorb the costs of building these large language models, afford some of these computing costs, as well as comply with regulation.”

Concerns are growing across the AI sector that Mr. Biden’s appointees will look to privately enforce the voluntary agreements.

Mr. Thierer said implicit threats of regulation represent a “sword of Damocles.” The approach has been used as the dominant form of indirect regulation in other tech sectors, including telecommunications.

“The key thing about a sword of Damocles regulation is that the sword need not fall to do the damage. It need only hang in the room,” Mr. Thierer said. “If a sword is hanging above your neck and you fear negative blowback from no less of an authority than the president of the United States … you’re probably going to fall in line with whatever they want.”

Mr. Thierer said he expects shakedown tactics and jawboning efforts to be the governing order for AI in the near term, especially given what he called dysfunction among policymakers in Washington.

• Guy Taylor contributed to this report.



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