What will Trump’s AI strategy be? His first term offers clues

AI’s growing importance in national policy: Donald Trump’s approach to artificial intelligence during his upcoming second term as U.S. President is likely to be shaped by his previous stance on technology and national security issues.

• Trump’s first term included the establishment of the “American AI Initiative” in 2019, though its impact remains unclear.
• The rapid growth of generative AI since 2022 has made it a critical focus for policymakers and investors alike.
• Trump’s allies, including Elon Musk and JD Vance, have ties to the AI industry and may influence his approach.

Potential policy shifts: Trump is expected to repeal President Biden’s executive order on AI and implement his own policies favoring innovation and free speech.

• The Republican Party platform pledges to replace Biden’s order with an approach “rooted in Free Speech and Human Flourishing.”
• Trump’s administration may focus on supporting U.S. companies driving AI innovation, such as Nvidia, Amazon, Meta Platforms, Microsoft, and Alphabet.
• There could be efforts to limit Chinese companies’ capabilities in AI, potentially through strengthened chip export restrictions.

Parallels with 5G policy: Trump’s approach to AI may mirror his strategy for 5G development during his first term.

• Trump prioritized U.S. leadership in 5G technology, framing it as a race America must win for prosperity and national security.
• His administration supported private sector efforts to build 5G infrastructure through spectrum offerings and backing industry consolidation.
• A similar approach to AI could involve government support for U.S. companies while restricting foreign competitors.

Geopolitical considerations: The AI race is intertwined with broader geopolitical tensions, particularly regarding Taiwan and China.

• Taiwan’s critical role in semiconductor manufacturing makes it a key factor in AI development and U.S.-China relations.
• Trump has previously taken a tough stance on Taiwan, suggesting it should pay for U.S. defense support.
• The need for Taiwan’s advanced chip manufacturing capabilities may influence Trump’s approach to cross-strait relations.

Economic and trade implications: Trump’s AI policies are likely to have significant economic and trade ramifications.

• There may be increased pressure on companies to develop a U.S.-based semiconductor supply chain.
• Trump’s proposed tariffs on Chinese imports could impact the AI industry and broader U.S.-China trade relations.
• The administration may seek to balance driving U.S. innovation with slowing down global competitors.

Investor considerations: Trump’s approach to AI will have significant implications for investors with exposure to AI-related companies.

• Major tech giants and AI-beneficiary companies like Eaton may be affected by policy changes.
• While AI innovation is expected to advance under Trump’s administration, there may be periods of uncertainty due to geopolitical maneuvering.
• Investors should prepare for potential volatility as Trump balances domestic innovation with efforts to maintain U.S. global leadership in AI.

Looking ahead: Trump’s AI strategy is likely to prioritize U.S. competitiveness while addressing national security concerns, potentially leading to a complex policy landscape.

• The administration may seek to accelerate AI development in the U.S. while implementing measures to slow progress in competing nations.
• Balancing innovation, national security, and international relations will be crucial as AI continues to shape global technological and economic landscapes.
• Investors and industry leaders should remain vigilant, as Trump’s approach to AI could significantly impact the sector’s growth and competitive dynamics in the coming years.