"Calls to 'Slow Down AI Development' Grow... But Why the U.S. Can't Stop Investing in AI"

Possibility of Stronger Regulation
Under Democratic Control After U.S. Midterm Elections

iM Securities: "U.S. Security at Risk If China Takes the Lead"

Mirae Asset: "Even Democrats Cannot Ignore Competition With China"

Recently, as the heads of artificial intelligence (AI) developers such as Anthropic, OpenAI, SpaceXAI, and Google DeepMind have begun discussing the need to dial back the pace of AI advancements, the U.S. political arena is witnessing a flood of proposals for strict AI regulatory legislation. However, within financial markets, there is a prevailing view that because the race for AI supremacy between the U.S. and China is directly tied to national security, such regulations are unlikely to become a reality.

According to Mirae Asset Securities on September 16, the “Prohibition on Artificial Superintelligence Act” introduced by both chambers of the Democratic Party seeks to permanently ban the development and deployment of superintelligent AI that surpasses human intelligence. It also mandates a temporary pause on advanced AI development until a federal regulatory framework is established. The act calls for the creation of a new federal agency dedicated to enforcement, and violators could face up to 20 years in prison.

Soon after, the Senate submitted an “AI Data Center Moratorium” bill prohibiting the construction or upgrading of new AI data centers exceeding 20 megawatts (MW). This bill mandates reporting on the environmental and energy impacts of AI data centers and the public disclosure of water usage information.

The legislation package also includes strict taxation proposals for major AI companies. The Democratic-led Senate introduced a bill to collect a one-time in-kind tax equal to 50% of all shares held by major U.S. AI firms, incorporating them into a national wealth fund. This fund would pay out 5% of its annual market value directly to the public. Furthermore, the bill would require companies operating both AI and non-AI businesses to undergo structural separation.

The House likewise introduced the “AI Taxation and Job Protection Law,” which proposes taxing the higher of either token sales revenue or products/services revenue for large AI companies, and using these funds to support those affected by employment shocks. Additionally, other legislative proposals include the “AI Civil Rights Act” making preemptive risk assessment and audits mandatory, as well as bans on individualized pricing of products/services and wage determination based on personal data.

If the Democratic Party gains control of Congress after the midterm elections in November, it is expected that their stance on strengthening AI regulation will become even more pronounced. However, competition with China is likely to moderate the intensity of such regulation. The Trump Administration has identified the AI race with China as a top priority and has stated that it will not change its “minimal regulation policy.” Both the U.S. administration’s chief AI officer and House Speaker Johnson have also argued that forced moratoriums are inappropriate and that self-regulation by companies is sufficient.

In reality, China’s pursuit has come uncomfortably close. According to the Stanford 2026 AI Index Report, the performance gap between flagship AI models from the U.S. and China has narrowed significantly, and the U.S.'s lead is estimated to be just around 6–9 months. Due to the growth of Chinese models such as DeepSeek and Alibaba Qwen, the share of tokens used in OpenRouter by Chinese AI models already exceeds 50%. While the U.S. is still in the lead, the situation is far from secure.

iM Securities analyzed that, with the U.S.'s hegemonic status already weakened by soaring national debt and interest payments that outstrip military spending, ceding AI leadership to China would deal a fatal blow to both the economy and national security. Moreover, given the existing virtuous cycle in the capital market where massive AI investments are linked to profit generation and repayment, imposing an artificial slowdown on development could trigger credit risks arising from high interest rate shocks.

Sungkeun Kim, researcher at Mirae Asset Securities, stated, “Just as during the space race of the 1960s, as long as China continues development, the U.S. will have no choice but to press ahead in order to maintain its lead. Even the Democratic Party cannot ignore competition with China. As the market fears, a scenario where computing demand decreases significantly is limited.”

This content was produced with the assistance of AI translation services.