As they prepare to depart the White House, President Biden and his administration made two major artificial intelligence focused moves during the week leading up to President Trump’s inauguration. On January 13th , the administration issued a new set of export rules (the “Diffusion Rules”) regarding advanced microchips, specifically targeting those chips used for the development and training of AI and machine learning models. And two days later, on January 15th, President Biden issued an “Executive Order on Advancing United States Leadership in Artificial Intelligence Infrastructure” (the “Executive Order”) that, among other things, directed federal agencies to lease federal sites for AI frontier model-related infrastructure.
The Diffusion Rules, issued by the Department of Commerce, places countries into one of three categories – U.S. allies and partners, “adversaries” (which includes Russia and China), and the rest of the world – and imposes caps on the export of advanced microchips based on those categories. Chip exports to adversary countries were already restricted prior to the Diffusion Rule, which places additional restrictions on the sale of certain advanced AI models as well. While chip sales to 18 allies and partners remains uncapped, the most significant change implemented by the Diffusion Rule may be the limitations it places on countries that qualify as neither an ally nor adversary – meaning the majority of the globe. According to the Biden Administration, the goal of the Diffusion Rule is to help ensure the U.S. remains the global leader in AI tech. US Secretary of Commerce Gina Raimondo stated that the Diffusion Rules will “safeguard the most advanced AI technology and ensure that it stays out of the hands of our foreign adversaries, [while] also enabling the broad diffusion and sharing of the benefits with partner countries.” Tech companies and industry groups, however, have expressed concerns that the new rules will harm U.S. competitiveness.
Like the Diffusion Rules, the Executive Order is, according to the Biden Administration, designed to protect the U.S.’s competitive lead on AI. The Executive Order outlines five principles for developing U.S. AI infrastructure, including job creation, national security, and clean energy, and emphasizes partnership between the federal government and private actors. The secretaries of both the Departments of Defense and Energy are specifically directed to identify at least three federal sites on which nonfederal tenants can build and operate “frontier AI” data centers. The Executive Order also mandates that nonfederal tenants would be required to build and operate “clean energy facilities” to operate such data centers.
Given the last-minute timing of these actions, it is unclear what ultimate impact, if any, they will have. With the second Trump Administration mere days away, , both the Diffusion Rules and Executive Order could very well be short lived. The Diffusion Rule has a 120-day comment period, meaning that the final form of the regulations will be determined by the Trump Administration, and Secretary Raimondo has stated that she “fully expect[s] the next administration may make changes.” Similarly, nothing would prevent President Trump from rolling back the Executive Order, as he has already committed to rescinding Biden’s landmark 2023 Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence.
Overall, the future of AI regulation in the U.S. remains uncertain,, and as the political landscape shifts, industry stakeholders will need to navigate an evolving and potentially volatile regulatory environment.
Ben Mishkin and Daniel Kilburn are attorneys in Cozen O’Connor’s Technology, Privacy & Data Security practice.
