The GAIN AI Act Will Undermine the Global Competitiveness of U.S. AI Chipmakers

Congress is currently considering enactment of the Guaranteeing Access and Innovation for National Artificial Intelligence (GAIN AI) Act, which would impose additional restrictions on the export of U.S.-made artificial intelligence (AI) semiconductors. If enacted, this legislation would impair the global competitiveness of U.S. chipmakers without advancing national security interest. Following on now several years of evidence as to the effectiveness of these types of controls for meeting intended national security goals, this latest measure will likely do more harm than good in the ongoing geopolitical technology competition. 

The AI Diffusion Rule

Three years ago in October 2022 the Biden Administration introduced controls on the export of sensitive semiconductor technology to certain designated countries, including China, in an attempt to prevent that country from acquiring the technology, equipment, and devices necessary to support advanced AI development. Even in early 2023, analysis by the Center for Strategic and International Studies (CSIS) had already noted that an expansion of these controls could make U.S. chip manufacturers and equipment makers less competitive in the long term by shrinking global market share, while leading to the “designing out” problem whereby China and other countries are forced to innovate and develop products that eventually contain no U.S. technology and are thus outside the reach of controls.

Yet, though a bipartisan consensus existed in 2022 that at least some export controls were needed for purposes of national security, the initial export controls were progressively expanded into areas where the existence of a national security interest was questionable at best. This process culminated on the final days of the Biden presidency with the enactment of the so-called “Diffusion Rule.”

•  On January 15, 2025, the administration introduced the “Framework for Artificial Intelligence Diffusion,” establishing a tiered system governing global trade in AI-relevant semiconductor technology.
• Among other things, the new regime was intended to ensure that US-based chip companies retained at least 50% of their AI-relevant production for domestic users, severely limited exports to most other countries outside a small “Tier1” of close US allies, and banned exports to countries deemed a security risk, including China and Russia.
• Compliance with the diffusion rule was set to go into effect on May 15, 2025, but the Trump Administration rescinded the “ill-conceived” rule before it took effect, citing widespread concerns over its potential adverse effects on the global competitive position of US AI chipmakers and on US innovation. 
   

The GAIN AI Act

At present, Congress is considering enactment of the GAIN AI Act, a measure which would resurrect key features of the Biden administration’s Diffusion Rule.

• The Senate version of the 2026 National Defense Authorization Act (“NDAA”), passed on October 9, contains a bipartisan amendment, the “GAIN AI Act,” which, in a manner resembling that of Biden’s Diffusion Rule, would give U.S. customers a right of first refusal with respect to semiconductor products before a chipmaker could secure an export authorization for those products.
• The stated purpose of this measure is to ensure that U.S. chip customers “aren’t forced to wait in line behind China’s tech giants when purchasing the latest AI chips.”
• The GAIN AI Act would apply even to older AI Graphics Processing Units (GPUs) such as Nvidia’s HGX G20, which are specifically designed to comply with previous export restrictions while serving international markets. In other words, the Act would restrict exports even of U.S. AI chips that pose no threat to U.S. national security.
• Further, the House version of the NDAA contains no provision comparable to the GAIN AI Act, making it unclear whether the Act will survive in conference.
   

Administration Priority: Preserving U.S. Global Dominance in AI Chips

The Trump administration supports export controls directly linked to national security but opposes restrictions on U.S. chip exports like the diffusion rule and the GAIN AI Act which would hamper U.S. chipmakers in global competition without contributing to national security.

• Trump said in July 2025 while unveiling his AI Action Plan that “we will maintain necessary protections for our national security, but we will never forget that the greatest threat of all is to forfeit the race and force our partners into a rival technology.”
• One administration adviser, David Sacks, says that in assessing proposed export controls, “in each case we must ask the question, does this help the American tech stack dominate the world? What maximizes our global market share? If we look around the world in 5 years and see that the Global South is running on Huawei Cloud Matrix + Deep Seek, for example, that’s not the outcome that we want.”
• Sacks points out that the Biden administration’s “overzealous regulations [including the diffusion rule] were predicated on the assumption that China couldn’t produce enough chips for export, so it didn’t matter how much regulatory burden was imposed on American AI companies.” In fact, Chinese makers of AI chips are surging capacity and are likely not only to meet domestic demand, but soon to compete head-to-head with US chipmakers globally.
   

Why Congress Should Reject the GAIN AI Act

Moreover, there are additional factors that warrant Congressional rejection of the GAIN AI ACT: 

• Protectionism Rather Than National Security- The original purpose of chip export controls was to prevent China from gaining access to the most advanced semiconductor technology supporting AI. The GAIN AI Act wanders away from national security concerns onto industrial policy ground, effectively rationing the availability of less-advanced chips-- that are not otherwise restricted for Chinese users-- in a manner that favors U.S. chip consumers as a form of protectionism. GAIN AI Act proponents acknowledge this, arguing that “it’s time to protect American market interests by prioritizing domestic orders.”
• Solving a Nonexistent Problem-The GAIN AI Act seeks to solve a problem that does not exist, e.g. shortages of AI chips for U.S. consumers. U.S.-based Nvidia, the world’s largest maker of advanced AI chips, says that “We never deprive American customers in order to serve the rest of the world.” In July White House Office of Science and Technology Policy (OSTP) Director Michael Kratsios said that “right now we’re not seeing a chip [supply] restraint….There is more than enough chips for what we want to accomplish over the next couple of years….the hypothetical chip constraint [is not materializing].”
• Supply Chain Concerns- Proponents of the GAIN AI Act argue that it would speed up access to critical chips for U.S. users, but compliance with the Act’s requirements could slow chip delivery both to U.S. and foreign customers as chipmakers are delayed by export licensing paperwork and the regulatory review process. David Sacks observes that “excessive bureaucratic delays are a gift for Huawei, which will fill out purchase orders as American companies fill out forms.”
• Damper on Innovation- Export controls have already impaired innovation by U.S. makers of AI chips, compelling them to develop and market devices which are less capable in order to serve foreign markets in compliance with the controls – in effect, innovation in reverse. The additional GAIN AI Act’s requirements will restrict U.S. chipmakers’ access to global revenues, foreign capital, and international innovation partners, acting as a long run drag on U.S. chip innovation.

The GAIN AI Act is a solution searching for a problem, with measures that will inflict real and long-lasting damage to the global competitive position of U.S. makers of advanced AI chips. Congress should ensure that the 2026 NDAA does not include this misguided provision.