The Economist: Investment plan says a lot about Donald Trump’s AI priorities

When President Donald Trump announced a US$500 billion ($794b) of private-sector investment in American Artificial Intelligence on January 21, his second day in office, he basked in the accolades of the three men backing the “Stargate” project: OpenAI’s Sam Altman, Masayoshi Son, a Japanese tech mogul, and Larry Ellison of Oracle, an IT firm. He called it the largest AI investment in history.

Then came the kicker. “This is money that normally would have gone to China”.

Considering that AI will be the defining technology of his time in office, Mr Trump can sound awestruck by it. “AI seems to be very hot,” he said. But as the announcement of the four-year project (which starts with the construction of massive data centres in Texas) foreshadowed, AI is likely to be a priority within his administration. That is for strategic as well as economic reasons. The government’s “north star”, as one tech insider in Washington puts it, will be how to beat China in the AI war.

Silicon Valley has China hawks already nestled in the White House. David Sacks, Mr Trump’s AI and crypto tsar, is a venture capitalist who believes that the benefits of America winning the geopolitical battle with China outweigh the economic costs of isolating it. Michael Kratsios, an AI policymaker in both Trump administrations and formerly of Scale AI, a tech startup, thinks that China is “hell bent” on exporting its AI technology worldwide. Jacob Helberg, Mr Trump’s pick for under-secretary for economic growth and a former adviser to Palantir, a Silicon Valley darling, has argued that it is imperative for America to win the AI arms race with China.

The big question is, will Mr Trump continue the Biden administration’s approach of prioritising constraints on China, with export curbs and the like, to maintain America’s lead in AI? Or will he put more emphasis on freeing America’s tech firms to out-innovate China?

There are justifications for trying to keep China at heel. In Silicon Valley, supporters of a crackdown say Chinese firms steal American intellectual property, helping their large language models (LLMs) to advance fast. They argue that Chinese tech firms have evaded export controls on American semiconductors, either by buying cutting-edge American graphics processing units (GPUs), the chips used to train and run AI models, on the black market, or by renting out capacity on other countries’ cloud servers. This doesn’t only help China’s tech industry. They note that China is far ahead of America in incorporating AI into military tech, so hobbling it is justified on national-security grounds.

An early test of Mr Trump’s support for such curbs will be his reaction to Mr Biden’s “Framework for Artificial Intelligence Diffusion”, released for a four-month review period days before Mr Biden left office. It aims to impose strict licensing requirements on the export of advanced GPUs, as well as the data that underpin frontier LLMs, to close the loopholes that America believes Chinese firms use to build their models.

The framework would make it more difficult for some countries, including American allies in the Middle East and Asia, to build large data centres. Supporters, including some Republicans in Congress, hope it will curb China’s access to American technology and send a clear signal to other countries that if they want access to American AI infrastructure they need to stay out of China’s orbit.

But there is opposition, too. Nvidia, a semiconductor giant that still sells GPUs in China, says the “misguided” framework is far too prescriptive and will undermine American innovation. Some argue that putting too many restrictions on third countries’ access to American AI infrastructure will push them into China’s arms. Moreover, constraints on China may be counter-productive. The release on January 20th of the latest models by DeepSeek, a Chinese AI firm, which were cheaper to build than similar American ones, may be a sign that the curbs have encouraged Chinese firms to become hyper-efficient.

In the tech industry, the hope is that as well as cracking down on Chinese malfeasance, the Trump administration will push to promote American competitiveness by loosening the reins. As John Villasenor, an expert on tech policy at the University of California, Los Angeles puts it, “The best way to stay ahead of China is not to over-regulate at home.”

On his first day in office Mr Trump took a step in this direction by scrapping Mr Biden’s executive order of 2023 that required builders of advanced LLMs to share information with the American government. Tech insiders in Washington say they expect the new administration to take a “sector-specific” approach instead. In other words, rather than overarching AI regulation, federal agencies would oversee the use of AI within their own domains.

Some may worry that, with less regulation, tech firms will overstep the limits of AI safety. But for now, AI “accelerationists” have overtaken the “doomers”. In a sign that deregulation is high on Mr Trump’s agenda, he promised the three joint-venture partners in Stargate to make it “as easy as it can be” for them to build their project.

One further force promoting AI innovation could be defence spending. America puts only a tiny fraction of its $850b defence budget into AI. Silicon Valley executives hope that the Trump administration will allow more participation by startups building AI weapons and systems in the competition for defence contracts.

In short, there is synchronisation. Mr Trump wants lots of investment in America, a roaring stockmarket and the ability to claim he is vanquishing China. America’s AI giants want to build bigger models to compete with each other and keep ahead of China, and to have more customers to justify their investments. Stargate looks like the shape of things to come.