The Trump administration’s AI action plan got a surprisingly warm welcome this week from US tech-industry and foreign-policy experts. The plan was unusual for this administration, and for the Republican Party, in that it advocates complex government-led initiatives, requiring considerable government funds, to advance political goals in a sector that is overwhelmingly made up of private companies. This is Trumpian industrial policy, and on paper at least it is even more interventionist than Biden-era industrial policies aimed at the tech sector. With its invocation of “renaissance” it is also more optimistic about technological innovation than any administration since Bill Clinton’s: “An industrial revolution, an information revolution, and a renaissance—all at once. This is the potential that AI presents.” In announcing the plan Trump also called AI “pure genius.” SIG’s view is that the AI action plan is both inspiring and well done but that implementing it will be extremely challenging.
Some of the challenges are obvious. The Trump administration has been cutting government bureaucracies, including in tech, yet this plan has numerous policy prescriptions that require government bureaucrats to implement them. The initiatives also require funding, which it is up to Congress to give. While there is general bipartisan support for AI investment, primarily as part of the strategic confrontation with China, the new AI action plan revived the White House’s effort to prevent states from legislating on AI. A similar provision in President Trump’s signature tax bill was defeated in Congress by a crushing majority. The AI action plan’s tactic is to say the federal government will withhold funds from any state that regulates AI in a way that would be “burdensome” or “unduly restrictive to innovation” — as judged by the White House on the advice of federal officials. Congress members represent state and local constituencies, not a national one. That is where their power comes from. Many of their constituents have very grave concerns about AI and expect their representatives to do something about it. When the AI section of the tax bill was rejected by Congress, Republicans, who have been much more for states’ rights (for example on abortion) than Democrats, were overwhelmingly against the president’s proposal. In several senses, then, the AI action plan is primed for conflict with Congress.
The action plan is also primed for conflict with allies. The AI “dominance” foreshadowed by Vice President Vance in his speech earlier this year in Paris is transformed in the action plan to advocating export of the full American-made “AI stack” to allied countries. An American hardware-and-software suite, deliberately cleansed of any technology produced by “adversary countries” (China), would then become the infrastructure for whatever applications companies in other countries might be able to build. In other words, AI infrastructure would resemble the Internet of 2003: an American platform that others could participate in subject to US rules and US intelligence surveillance, and at a tremendous competitive disadvantage to US companies. This is exactly what other countries want to avoid, especially European countries who are still at the core of the US’s alliance structure. Just as the Trump administration wants US AI to be US-made and reflect US values, Europe wants its own AI sector to do the same — just as China insists on its AI companies reflecting “socialist values.” The action plan rightly stresses that for US AI to have maximum strategic benefits it must be on open rather than closed models and build on alliances rather than going alone. But in a geopolitical environment where allies are considering a tech-driven Buy European Act — and in which US tech giants are setting up “sovereign data clouds” just to keep European customers happy — it is hard to see how exporting the US AI stack in toto (once such a stack exists) will be welcomed abroad. China’s more subtle, and affordable, approach seems more likely to succeed.
The most serious challenge to the administration’s AI action plan is the challenge that faces any government regulation of digital technology: the systems are run by private companies according to market logic, more or less. Silicon Valley’s reaction to the AI action plan has been very positive. It is, after all, a strikingly pro-business and pro-technology plan. The plan’s urging of more government and private spending on the electric grid and data centers will certainly boost industry.
But what if capacity is overbuilt, or the wrong kind? Energy expenditures for AI so far have been fantastically high. If AI is to succeed it will need more energy and more data centers. Nonetheless, AI companies also want to reduce costs, which is why a great deal of investment is going into finding less energy-intensive ways to get AI results. (Data-center companies are also striving to find ways to lower their energy requirements.) The government could end up financing with taxpayer money an infrastructure that won’t be what is needed in five or ten years. Investors should be cautious of extrapolating investment opportunities from the areas that the AI action bill is targeting. The obstacles to the plan are many, and the record of government-led innovation policies is decidedly mixed.