The US Treasury proposes a rule to crack down on US high-tech investments in areas like AI and supercomputing in China, Russia, and other "countries of concern"

U.S. investors in AI, semiconductors, quantum computing, and related fields will face new notification and prohibition requirements for investments in China and Russia.

The U.S. Treasury Department has proposed a new rule to restrict American investments in specific high-tech sectors within China, Russia, and other nations deemed "countries of concern." This initiative, stemming from the Comprehensive Outbound Investment Security (COINS) Act passed as part of the Fiscal Year 2026 National Defense Authorization Act, aims to prevent U.S. technology from aiding foreign adversaries' military modernization, surveillance, and human rights abuses. The proposed regulations will require U.S. persons to notify the Treasury of certain transactions involving covered foreign entities engaged in "notifiable technologies" and prohibit other transactions involving "prohibited technologies." The five initial sectors targeted are semiconductor technologies and microelectronics, artificial intelligence systems, quantum information technologies, high-performance computing and supercomputing, and hypersonic systems. Biotechnology has also been added to the proposed scope of regulated technologies.

This proposed rule signifies a substantial tightening of U.S. government oversight on outbound capital flow, particularly targeting strategic technology sectors. By codifying and expanding upon existing outbound investment security programs, the Treasury is creating a more structured and comprehensive framework for identifying and potentially blocking investments that could compromise national security. The inclusion of biotechnology indicates a broader, evolving definition of critical technologies that warrant scrutiny, suggesting future expansions could target other emerging areas. This move underscores a strategic shift towards a more assertive stance in managing technological competition with geopolitical rivals, moving beyond mere export controls to actively shape investment landscapes.

For U.S. technology companies and their investors, the implications are significant, potentially leading to divestitures or the restructuring of international operations to comply with the new regulations. The requirement for notification and the outright prohibition of certain investments will necessitate greater due diligence and may reroute capital away from targeted countries, impacting innovation timelines and market access for both U.S. firms and the countries subject to these restrictions. Companies operating in these sensitive sectors will need to closely monitor further regulatory guidance and assess their exposure to ensure compliance and mitigate potential risks.