By Asheesh Agarwal
As the rise of powerful Chinese AI models, such as DeepSeek’s r1and Alibaba’s Qwen 2.5, have laid bare, U.S. policymakers must choose a pathway for artificial intelligence (AI). One path, littered with regulations and roadblocks, treats AI as a threat to manage rather than an opportunity to nourish. Down the other path, policymakers and the private sector partner together to promote innovation and maintain our global technological leadership.
The Road to Nowhere
As Vice President Vance recently explained to the AI Summit in Paris, “excessive regulation of the AI sector could kill a transformative industry just as it’s taking off.” The European Union’s (EU) AI Act, for instance, prohibits certain AI functions that the EU deems an “unacceptable risk” to citizens. The Act carries enormous fines for noncompliance, up to 35 million euros or seven percent of their global annual revenues. Canada’s Competition Bureau has cited this Act “as a model for Canada,” and even here at home, the Federal Trade Commission’s (FTC) former chair wants to continue the Biden administration’s AI policies, which required companies to pretest models before their release and which used antitrust law to limit AI investments.
The evidence, however, shows that excessive regulations can stifle innovation. Europe’s AI sector lags far behind the United States; from 2023 to 2024, more than $47 billion in investments flowed to U.S. generative AI firms, while European firms raised only $8.8 billion. In a recent letter, 150 European business leaders complained that the AI Act could damage Europe’s long-term competitiveness. Another official worried that American companies were outpacing their European rivals: “I’m not saying it’s good but in America you have a lot of AI and no regulation, in Europe you have no AI and a lot of regulation.”
Here at home, these types of policies would hamstring American innovators and cede leadership to Chinese companies. President Trump has called DeepSeek, an open-source tool developed by a Chinese company using less data and less sophisticated chips that many U.S. models, a “wake-up call” for America’s tech companies. Indeed, the evidence belies the need for heavy-handed regulations. In 2023 alone, nearly 900 new AI companies entered the market and venture capital soared to $67.2 billion, while U.S. AI patent filings surged 621 percent from 2018 to 2022. Earlier this month, large U.S. companies committed to investing hundreds of billions more into AI infrastructure and research.
Moreover, the FTC itself found no competitive problems in the AI sector. In a report issued in the Biden Administration’s waning days, the agency found that “AI technology is rapidly evolving” and that the sector’s evolution will determine whether competitive concerns arise in the future. The agency also found that small companies can benefit from contracts with large tech companies, such as by gaining access to critical training, testing, computing resources and optimized hardware.
The Path to Prosperity
To promote innovation, policymakers should continue to encourage light-touch AI regulation, ground antitrust enforcement in evidence of consumer harm, invest in critical AI inputs such as energy and talent, and collaborate with our allies to counter authoritarian threats.
Beyond these touchstones, the United States should continue to encourage the development and deployment of both open and closed-source AI models, both to promote competition and to safeguard our national security. In terms of competition, the FTC itself has explained that “open-weights models have the potential to drive innovation, reduce costs, increase consumer choice, and generally benefit the public – as has been seen with open-source software,” while Canadian regulators found that the “increasing availability of open-source AI technology and public cloud infrastructure makes AI development more accessible.”
In terms of national security, the United States must provide the world with alternatives to China’s models. For years, China has sought to leverage technology to supplant the United States as the world’s preeminent technological superpower and gain economic and national security superiority over the Western world. China seeks to achieve its goal, in part, by embedding its technology, and therefore its authoritarian values, into the global technological infrastructure, including Huawei’s telecommunications equipment and now DeepSeek’s open-source AI tools. The United States must develop and deploy both open- and closed-source models to ensure democratic principles shape AI’s future. Ceding this ground risks allowing China’s authoritarian vision to define global AI and perhaps to embed Chinese-built models with our allies.
In Paris, the Vice President warned against “paralyzing one of the most promising technologies we have seen in generations.” America has always prioritized innovation over regulation—and when it comes to AI, America should follow the same course.
Asheesh Agarwal is an advisor to the American Edge Project and an alumnus of both the Department of Justice and Federal Trade Commission.
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