AI and the American Dream: Innovation, Affordability and American Dominance

Good morning. I'll call this hearing to order. Thank you to the witnesses for taking your time and sharing your expertise over the next couple of hours. Today's uh committee is asking a very simple but important question. Am I hearing myself twice?

Yeah.

I am, OK.

It says Republicans coming in late.

I thought it was the Democrats not being here yet, but anyways.

But they're quiet.

Yeah, good point, good point. Is how do we get, maybe that was all LVR. OK, she's there, see, OK. Uh, how do we get artificial intelligence right? That is the ultimate question I think we are struggling with as a nation and frankly, as a committee. That means making sure AI strengthens our economy, supports small businesses, and protects consumers. It means keeping America ahead of China and our adversaries. It means using American innovation to help families facing the high cost of housing borrowing and everyday life. AI is a powerful tool. Like any powerful tool, it brings both opportunity and risk. We should not run from this potential, but we should also not ignore the risks. We should ask the right questions, listen to the experts before us, and make sure America remains ahead. For the people we serve in South Carolina and across this nation, the real question is whether this technology makes life better. Can it help a family in North Charleston save time and money on a mortgage? Can it help a small business in Greenville become more competitive? Protect a senior in Columbia from fraud? Bring new jobs to communities like Spartanburg? If we get this right, the answer can be yes. AI will s- also change the way Americans work. That does not mean we should fear the future. It means we need to make sure workers have the tools, training and opportunity to benefit from it. The future of work should not be something America fears. It actually should be something America leads. AI solutions that help increase affordability for American families will not come from government bureaucracy. They will come from entrepreneurs, innovators, workers and small business owners, willing to use these new tools to build, compete and solve problems. This is where AI can be part of the solution. Roughly twenty percent of small businesses in the United States today are already ai to help lower the cost of doing business which means prices are gonna be lower for consumers and in the financial services sector ai can reduce friction and frankly, increase speed. It can improve customer service, help detect fraud faster, help small businesses do more with less. ai should be a tool that strengthens American workers not one that makes them feel replaceable. There is dignity in work. And if America leads, AI can help workers build skills, support their families, and create new opportunities in South Carolina and all across this great nation. But responsible AI innovation matters. And when we consider regulation, we must ask whether it will make it harder for a community bank to lend a start up to grow or a family to access credit. We need thoughtful and well-informed solutions that protect Americans and mitigate major risks without hampering innovation or pushing it overseas. That is why this hearing is so important and frankly, timely. AI is already changing our economy and our markets. We must make sure the next chapter of responsible innovation is written here in America. not in China. Cyber security and national security must be taken seriously. The United States cannot afford to let China or any other adversary gain a technological edge in artificial intelligence. This includes global markets where China and Huawei are pursuing an aggressive agenda to displace US technology around the world. The world's tech stack, including powerful AI tools, must be built on trusted US networks and technology. We have to carefully craft export control policy that is clear and concise, allowing US companies to compete in the global market while ensuring we are not handing our adversaries tools they can use against us. This hearing builds on the work we have already started through member round tables. Today, we will hear from experts who can help this committee better understand the opportunities, the risks, and the choices before us. I look forward to your testimonies. If America leads, AI can help lower costs, improve affordability, expand opportunities, strengthen small businesses, protect our financial system, and keep America secure. That is the future we should be fighting for. Ranking member?

Uh.

Floor is yours.

Thank you, Mister Chairman, and thank you for holding this hearing. Artificial intelligence has extraordinary potential and presents extraordinary risks. Americans across this country are deeply concerned about how artificial intelligence will affect their lives. Americans are also concerned about what looks like corruption in plain sight, driving the Trump administration's AI policy. Influential tech giants are concentrating ownership over powerful technologies, and attempting to rewrite the rules that govern them. A corrupt Trump administration basically is giving them whatever they want. The impact on American families is massive. First, AI companies are on a spending spree to build data centers. This is the infrastructure that supports AI, and families in areas surrounding these data centers are already paying a price. Residential electricity prices, which have risen more than sixteen percent since Donald Trump took office, are expected to climb as much as forty percent by twenty-thirty. Nearly one in three households is struggling to pay their utility bills. The Trump administration's response has been a weak request for voluntary commitments from big corporations. And that leaves families footing the bill. Second, AI companies are addicted to debt. Early in AI development, these companies financed their own investments, but now they are by borrowing upwards of a trillion dollars to finance spending on data centers, chips and other AI infrastructure. they borrow from private credit funds that in turn borrow from banks. This means that if AI tumbles, it will bring down many in private credit, and that in turn will risk bringing down giant banks. The possible failure of AI companies looms larger every day. AI companies that are unable to increase revenues and service their massive debt loads, could trigger massive losses in the financial sector and another two thousand eight style crash. That in turn could wipe out huge amounts of value from Americans' retirement accounts. Third, Americans are worried about what will happen to their jobs in a world of rapidly improving AI capabilities. AI has already started reshaping the workforce. While we don't know, what the long-term effects on unemployment will be, we cannot wait around to see how many jobs will be eliminated before we start to prepare for the coming upheaval. We have a decision to make. Either AI will profit a handful of the richest people, making them even richer, or the benefits of AI will be used for all Americans. If we continue to do nothing, the billionaires will suck up all the value from AI. But if we start now to tax AI and to use that money to fund free education, apprenticeships, and encourage new job creation for the workforce, we can share the benefits of AI across our country. Before we hear from our witnesses, I wanna raise one other issue. China is also working feverishly to develop AI, including AI weapons systems that can be turned against the United States. One company, NVIDIA, has uh makes the chips that are powering AI's advances. In recent years, NVIDIA's valuation has ballooned to nearly five trillion dollars. That makes NVIDIA the world's biggest company and nvidia's ceo jensen huang a very powerful person and mister huang wants to sell nvidia's chips to china which will profit his own company and advance china's ai development now i invited nvidia's ceo jensen huang to testify at this hearing and he refused to join us i invited mister huang because he and nvidia are lobbying hard to get a blank check from the Trump administration to allow the sale of advanced chips to China. Mister Wang's efforts have alarmed senior military leaders here in the United States, who have warned that such technology could strengthen China's military and put our own national security at risk. No matter. In Trump's DC, money talks and President Trump appears to be giving policy handouts to the highest bidder. If it's not plain old-fashioned bribery, it sure smells like it. Mister Wong and NVIDIA have been active here in DC. NVIDIA donated a million dollars to the Trump inauguration. Mister Wong made a big donation to Trump's favorite project, his gold-encrusted ballroom. Mister Wong wheedled his way into a seat on Air Force One on the President's summit with President Xi in China. Mister Wang even managed to score a meeting with President Xi himself, along with President Trump, about NVIDIA's business interests. All that sucking up to the president has paid off big time for Mister Wang. America had strong export controls that would have blocked NVIDIA from selling these chips to China. But the Trump administration is relaxing these rules. The Trump administration has also turned a blind eye as massive numbers of these chips have been sold elsewhere then somehow magically made it to China. The American people deserve to hear Mister Hwang answer hard questions from both sides about the role he has played in undermining our national security. ai holds tremendous promise. But Americans are rightly concerned that it could further rig our economy. Congress can no longer be a bystander, as the risks from ai grow nearer and millions more American chips are sent to China. It is time for Congress to stand up so that the American people can share in the success of this technology, and not just be left holding the bag for whatever goes wrong. Thank you, Mister Chairman.

I'll now introduce the witnesses quickly. Uh, today we have before us Mike Flynn, Senior Vice President of ITI. David Feith, Senior Fellow at the Hudson Institute. We have Will Reinhart, who is a Senior Fellow at the American Enterprise Institute. We also have Doctor Sarah Myers-West. who is the Co-Executive Director of AI Now. First, we'll hear from Mister Flynn. You now have the floor for five minutes.

Chairman Scott, Ranking Member Warren, distinguished members of the Senate Banking Committee. My name is Mike Flynn, and I'm a Senior Vice President at the Information Technology Industry Council, or ITI. Thank you for inviting me to testify today. ITI represents eighty companies at the center of American innovation, including companies that operate at every layer of the AI stack, chip makers and designers, leading frontier AI labs and cloud service providers, cyber security firms, and the software developers that bring AI to consumers in the US and around the world. ITIS members are investing hundreds of billions of dollars in the United States to build semiconductor fabs, conduct research and development, for new AI applications and drive innovation at every layer of the AI stack. Artificial intelligence is the most significant driver of economic growth in a generation. And the competition within ITI's membership and the broader IT ecosystem is fierce. Frontier AI models rely on thousands of highly skilled engineers, advanced semiconductors with features many times smaller than the width of a human hair. and networking that operates at the speed of light. To name only a few of the vital inputs needed to build and run a frontier AI model. We should view the American AI stack as an asset to US economic security. Congress must not take this for granted. US companies need clarity and certainty to sign multi-million dollar contracts with customers, spend billions of dollars on custom chips, and continue the trillion dollar investments in America that are making the US the undisputed AI leader. The question before this committee is how to protect American AI leadership while promoting adoption of the US AI stack around the world. The AI supply chain is highly specialized, resource intensive, and globally complex. An AI server in an American data center providing AI to customers in South Carolina Depends on memory, from South Korea. Chips from Arizona, made with tools, designed in Massachusetts. A semiconductor may touch as many as seventy countries before it reaches a consumer. Key parts of the supply chain are based in allied nations in Europe and Asia, especially South Korea, Taiwan and Japan. Because of this reality, the United States must work with like-minded nations on economic security policies, like export controls. The agency Congress has tasked with this important work is the Bureau of Industry and Security, or BIS. To meet the demand of this moment, BIS needs appropriate resources and oversight. Recently, ICSI endorsed six bills that advance this through the House Foreign Affairs Committee. These bills are a down payment to improve BIS's ability to fight diversion of controlled items, ensure timely licensing, reviews and develop AI export controls side by side with industry experts. Effective export control policy and enforcement must be part of a broader strategy that enables the US technology sector to remain agile and competitive in global markets for the long term. With the remainder of my time I'd like to touch on one other issue that I know is is top of mind for this committee and that is the cyber security of financial institutions. Frontier AI models are developing and accelerating the pace and presenting new challenges for cyber security professionals. That is why it is more important than ever that industry and government work together to address these emerging risks. One thing Congress can do right now is to ensure a long-term reauthorization of the Cybersecurity Information Sharing Act, or CISF fifteen. This is a critical law that protects the ability of organizations to share cyber threat information and vulnerability information, not only with the government, but with one another. There is more work to be done. We welcome the partnership of of this committee on these serious questions of US economic security. Thank you, Mr. Chairman, for convening this hearing. I look forward to the committee's questions.

Thank you, sir. Mr. Feith.

Chairman Scott, Ranking Member Warren, and committee members. Thank you for the opportunity to testify. My focus is AI competition with China, and how export controls can help preserve American security and other interests. We face a historic opportunity today with three aspects. First, the AI Industrial Revolution will shape not just American civilization, but human history. It's hard to overstate the need to get AI policy right, especially regarding our strategic challenge from China. Second, we're at a hinge point in Trump administration AI policymaking. which rightly recognizes that America must win the AI race with China. Recent events involving the super-powerful mythos model, ship smuggling, and export control loopholes show why we need better strategy, rules, enforcement, and oversight. Third, this committee has a particularly key role to play. Members here and across Congress have introduced an admirable set of bills to strengthen America's export control system, bolster national security, and assert Congress's role in this key area of policy. What's at stake in the strategic contest over AI? One essential feature is the personalization of technological power. This is in some ways very positive, in some ways very threatening. AI offers personalized medicine, but also personalized warfare, and especially ominously personalized state power. Will this technology ultimately advantage systems that protect human freedom, or systems that stifle and tyrannize? There is some good news to start with. In the US-China competition in AI, the decisive factor is likely to be computing power or compute. Here, the United States and our allies enjoy a substantial advantage. Today, China's best AI chips are much less capable than America's, and thanks largely to export controls, their chips are falling further behind. Compute is the lifeblood of AI, and China has less of it at lower quality than do the United States and our allies. That makes compute China's principal choke point in the AI contest. But this advantage is not self-sustaining. It will last only if US and allied policy preserves it. This is where export controls come in. Unfortunately, current US export control policy has not been equal to the task. The Trump administration's top-line policy is to prevent America's most advanced ships from going to China. President Trump has said this repeatedly. His administration's AI action plan also calls for tougher more controls and more allied cooperation. But these policies are not yet realized. Instead, our stand on exporting advanced AI chips to China has become less clear. Commerce department entity listings haven't kept pace. Controls on semiconductor manufacturing equipment, perhaps the most important issue of all, remain loose. Remote access remains unaddressed. Amid signs of massive smuggling, especially via Southeast Asia, we have seen a sensational federal indictment, but little adjustment. from our export control system. And we have only recently learned that alarming loopholes in US rules were evidently created last year allowing sales of the most advanced US chips to Chinese firms outside of China and maybe also allowing China access to leading edge fabrication at allied firms like TSMC. Finally, on distillation attacks, supercharged IP theft for the AI age, we risk repeating twenty years of past failure to counter China's hacking. Hence the historic opportunity before this committee. I'd recommend enacting the set of complementary bills now before the Senate, including the AI Overwatch Act on exports to China, the Match Act on equipment, the Remote Access Security Act, the Chip Security Act on location verification, the Deterring AI Model Theft Act on distillation, and the Chip Equip Act, protecting American fabs at home. Each addresses a key piece of the puzzle. Also, enhance oversight of commerce. Draw on the classified record and real evidence from export control enforcement in the field. Finally, beyond export controls, you have an opportunity to codify the Commerce Department's ICTS authority and help protect US data center infrastructure from sabotage by Chinese exposed hardware. Key technological developments have changed world history. iron, gunpowder, nuclear weapons. AI is another. The future now turns on whether America, Western civilization and liberal democracy will lead the age of AI, or communism, oppression, and state power will. That is why these issues matter so much. America should innovate at home, export confidently to allies and trusted partners, and deny China the capabilities it needs to overtake us. Thank you. I look forward to your questions.

Thanks, sir. Mister Reinhart, the floor is yours.

Chairman, ranking member, committee members. As a kid, I was obsessed with my grandfather's red tractor, a classic farm mall age. For decades you could find it parked in between the garden and the barn, basically, you know, always pointed towards the house, acting like a sphinx, protecting the cornfields. I've since learned that the farm mall was truly revolutionary for the farms and families, uh, where I grew up in central Illinois. Tractors first spread through the west or through the wheat belt in the nineteen twenties but it took another two decades for the tech to be adopted for use in the corn belt. Farm malls were especially important for small to medium-sized family farms because they were high quality but affordable tractors that could do a range of tasks. It took years, however, for those farms to truly adapt to the new technology and to make it useful and to trai- to change how farming was done in the Midwest. As I see it, AI is in its wheat belt stage. It is having an impact in some very narrow and important categories, but yet it has been, it has yet to been, yet to be transformative to the broader economy. As I've detailed in my written testimony, one of the biggest trends that I'm seeing currently right now in AI is that it's a skill equalizer. In customer support, software development, legal analysis, writing, and education, AI continues to do its best by boosting those who are at the bottom. But when tasks fall outside the model's current capabilities, when workers are already at the frontier, AI can can do more to hurt performance than to help it. Importantly, judgment still matters. So as I see it, Congress really should be thinking about two things, scenario planning and better data sources. For this committee in particular, planning around agentic AI could be very useful. Agents are only now getting deployed and I know there's been some discussion of this, but they could have some incredible and important impacts in finance and banking and commerce that's something that I have been focused a lot on and I believe you should, as well. But we also need better data sources. Right now, the data on AI usage only has effectively a fifteen percent response rate. There are better ways to collect information, especially through payroll data and other and other sources that are currently being um deployed. But I would say that it's this, right? The the farm mall eventually transformed farming across the Corn Belt, but it required the right conditions. Congress can help create those conditions for AI. The opportunity is very, very real. But so is the work that's required to to do it. So thank you and I look forward to your questions.

You're done.

And and please, on behalf of the Chairman, Doctor Sarah Myers-West, you are welcome with your opening remarks.

Thank you. Um, Chairman Scott, Ranking Member Warren, and esteemed members of the committee, thank you for inviting me to testify on this important set of issues. My name is Doctor Sarah Myers-West and I, along with my colleague, Amba Koch, lead the AI Now Institute. we're an independent policy research center, founded in twenty seventeen to study artificial intelligence technologies. I also previously served as a senior advisor on AI at the FTC, where my role focused on the effects of AI as they were emanating across the broader economy. There's a tremendous amount of hope articulated in the vision for AI, that it will have transformative potential, that could lift our economy and improve the quality of life for all of us. We're equally seeing a tremendous amount of pessimism from the public about what this technology means for their lives and their livelihoods. This divide is because there are skewed market incentives incentives that have shaped corporate AI development and that are driving concentrated risk in the economy, that the public is being asked to absorb. Importantly, many of these harms are already here and they're being felt by everyday people, and they're going to continue out into the future, especially things go exactly as the industry intends. My message to this committee is that we must put the needs of the public back at the center of the AI economy. Congress has an obligation to intervene before an economic crisis occurs, starting by alleviating the burden that people are already feeling from AI, exercising congressional oversight over AI firms that have grown in size and in in uh political influence and stopping a bailout of the industry, that is arguably already underway. There are three core areas that I urge this committee to consider as urge as priorities for intervention. First, addressing the risky and capital-intensive nature of AI investment. AI companies are engaged in a race to the bottom, one in which firms have exhibited an extraordinary willingness to court risk, that's not just borne by the firms themselves, but by the wider economy and the public. AI development is increasingly being financed through complex and opaque instruments that hinge on the private credit market and are often kept off balance sheet through the use of special purpose vehicles. We're also seeing circular spending deals that hinge on the proj projected future revenues of just a handful of AI companies. And if those revenues fail to transpire to the tune needed to justify this capital expenditure the house of cards could come falling down. Second, the effects of an AI bubble would be acutely felt by the American people. It could wipe out a tremendous amount of American household wealth. And this is because the economy at large is already significantly exposed to AI risk across several vectors ranging from increased market exposure for everyday families to access to credit to job loss. We don't have to wait for a financial collapse to see these effects of AI play out across the economy. Working class Americans are particularly exposed to an AI driven market downturn. For one, the private comp- uh credit companies have made a casino of American workers' financial security. We're seeing a transfer of wealth from the public to these AI firms, devaluation and dislocation already emerging in the job market, and rising prices, especially in the utility sector, that could serve to depress consumer demand. Importantly, many of these factors will remain even in a scenario where there's no bubble burst. The vision for success in AI hinges on the significant displacement and devaluation of jobs across the economy. I want to underscore if the vision um for um for AI fails, we could face a market correction. If it succeeds, it looks like mass displacement, and this is not a bargain any of us need to accept. This is why it's important for Congress to stop the bailout of the AI sector, that's already in many ways underway. AI firms have received extraordinary subsidies from federal backing of of uh loans to uh direct uh funding to allocating federal lands for data center infrastructure. Um, and this is all before Congress has had the chance to meaningfully act to protect the public and the economy from the risks posed by the industry. The public's already aware of the risks that they're being asked to assume, and this is fueling the generalized antipathy that they're expressing towards AI. If the end goal is to promote American innovation and to build an economy that works for everyone, Congress must act. It must start by focusing on measures that can alleviate the economic burdens that are already being felt by the public, by shedding light on AI industry financing structures through the use of its oversight authority, and most importantly, by committing to stop the bailout before it deepens any further. Thank you.

Markable. Thank you very much. I appreciate your testimony today. I'll start by asking the first questions. Our economy will benefit immensely from American company's leadership in AI and advanced technology. However, we received a letter just recently, today, from Anthropic that Alibaba executed the largest known distillation attack on Anthropic to date. That means that our adversaries are willing to lie, cheat and steal to get access to the information necessary to make China the most dominant player in the market, as opposed to the free market economy that we have, that produces the world's greatest thinkers and innovators. And I think this is a very important point because when China lies, cheats and steals, the American consumer pays the ultimate price for that. When I'm in restaurants in Charleston and around the state, one thing I hear a lot about is the cost of electricity, water usage. There there is this uh fear associated with higher prices in an economy where it's very difficult for people to live paycheck to paycheck. And so when you put together these amazing attacks from our adversaries, the fear of our consumers, it puts us in a position where as a committee and as responsible leaders, we need to have a better appreciation for how the costs can come down and how to push back against the threats that could drive our costs up or make us less relevant. Mister Flynn.

Senator, thank you for that question, and I think you laid out the the depth of the challenges really well. When you think about the distillation attacks, uh in particular that's a a real challenge that the uh that the extent to which China will go. To me, the answer is about where is the USAI stack? Are we seeing it in Europe and the global south? And I I think it's worth saying that's not a a guarantee. The Spanish Ministry of the Interior just recently signed a significant deal with despite the fact that the US government over several years um has done a lot of education and advocacy. Uh going back to the five G conversation not that long ago about the dangers of having the cyber security risks of having Huawei in their core infrastructure, still it seems like we're having that conversation all over again.

Mister Reinhart, chatGPT is uh socialized throughout all of our our devices it seems like and of course all the other ones are working really hard as well how do we help the average family in this country benefit from lower prices more information i'll use this as an example uh someone was looking for an air conditioning unit at home and they used the these models to do research it would take several hours in ninety seconds uh i think so we have a lot of opportunities to share with the american

Yeah, the figuring out how to use technologies properly is something that is just uh, it's a it's a thankless task and something that is very difficult to do. I mean, you know, I work with this every single day and even I'm, you know, not completely sure of some of the capabilities. Um, but we do see a lot of people using, as you mentioned, we see people using Um, uh, agents as they're called to figure out the best prices for airlines, for a whole bunch of range of different products that they're buying. And to me that I think is a, um, it's a, it's a really, uh, prime benefit of these AI technologies, is giving consumers choices and showing them what's actually happening in the marketplace and giving them the ability to choose the better price in things that they work for their families and for their for themselves.

Excellent. Um, Mr. Faith. What is the single biggest bottleneck to maintaining US leadership in AI right now?

Uh, thanks, Senator. I think it's uh it's compute broadly, which includes both the chips and the chip making equipment, very crucially.

You said that in your testimony, that's one of the reason why I called on you to ask that question. Uh, help me understand uh perhaps the the larger perspective on sport controls and the and the the role it should play in keeping maintaining America's stronger position, especially against China. But perhaps the part of the question I would like for you to answer in twenty five seconds, by the way, uh is how do we make sure that our allies don't have a back door, either in the Middle East or Asia, that goes to China and gives them access to the most powerful chips. Now you have seventeen seconds.

I it's important. There's a there's a very big allied component which partly reflects the strength that the US and our allies together have in the leadership in these key technology areas that's in semiconductor design and in uh the manufacturing equipment but getting allies including the Dutch and the Japanese especially on board is really very important and we have only a mixed record of doing it over the last several years.

You did what I could not do in twenty-three seconds. Good job. Reigenwurmer.

Thank you, Mister Chairman. So. We need to address the serious national security risks of allowing advanced AI chips to end up in China. Last week, the New York Times reported that NVIDIA's chips have been, quote, "sought by nearly every branch of the Chinese military". And China's been getting its hands on this technology. Federal prosecutors allege that billions of dollars of chips and servers have been unlawfully diverted to China during the Trump administration. Now, I invited NVIDIA's CEO here to testify. He has claimed there is no evidence of chip diversion and that the Chinese military doesn't want his chips. But he will not show up here to repeat those claims under oath. Mister Fife, you served on President Trump's National Security Council until last year. How worried should we be about these chips falling into the wrong hands?

Thanks, Senator. I think very worried. I mean, the implications are very significant in ways that you pointed out, in part, uh, military, domestic repression, uh, also China's commercial strategic ambitions. There's an important additional aspect, which is that if we sell them these chips, it actually helps China compete against us in third markets around the world, helps them export their cloud, for example, and undermine the the market for US cloud exports all around the world when we're interested in otherwise uh maximizing the exports of the AI tech stack of the United States around the world.

So bad, bad, bad is what I'm hearing you say. Now, Congress has pending legislation to put a stop to that. Senator Banks and I have introduced the AI Overwatch Act, which would ban the export of advanced AI chips to China. Senator Kim and I have cosponsored the Match Act, which would ensure China's not getting the equipment it needs to manufacture advanced chips on its own. And Senator Cotton and I have cosponsored the Chip Security Act, which would ensure that we can track when AI chips are smuggled. Mister Feith, do you think Congress should pass these three bills?

Uh, yes, and kudos on the bipartisanship.

Good. Uh, Mister Chairman, there's broad support for these bipartisan bills. I Think we should mark these up, uh, this legislation this month, and I hope you'll have a chance to agree on that.

Well, the general moment from Massachusetts, you have the rest of your time and I'll sorry,

No.

I'm OK.

So, um, I wanna turn now to how the AI boom is being funded. AI companies are on track to spend a whopping seven trillion dollars on AI infrastructure by twenty thirty, and are turning to shadowy financing alternatives to

The impact on them would be significant, even if they haven't

direct

actually invested in AI because we could see compounding effects across people's retirement funds their pension funds um we'll see job layoffs and and a potential credit freeze the underlying conditions of our economy make us very ill prepared to deal with this kind of market exposure and our social safety net is not well prepared for these kinds of conditions so it could be a perfect storm that will be felt most acutely by people who are already struggling to make things work and it would be irresponsible to look away.

Thank you uh for that answer. You know, AI executives are already well aware of what's at stake and they are right now trying to lay the groundwork to leave American taxpayers holding the bag if their big bets go bust. OpenAI, for example, has pushed the Trump administration to quote " lean in" and assist the industry by quote, de-risking. AI expansion, including expanding federal tax incentives and loan guarantees for AI companies. So I'd like to get our panel of experts on the record and just go down the line, one sentence or even one word. Would you support the Trump administration bailing out big tech CEOs and AI companies? Doctor Myers-West.

I would not support a bailout of the AI industry.

Mister Reinhart?

Goodness, no.

I like that, Mister Five.

Uh, hard to generalize, I would say there are some funds uh that uh come from places like the CHIPS Act that the Commerce Department still has and could use very productively.

I understand that, but do you wanna bail out AI if these bets go bad?

I I think the CHIPS Act on onshoring semiconductor manufacturing is a better bet.

Ah, uh, Mister Flynn.

I would agree with David, I would also say that um I haven't seen a particular proposal.

I'm sorry?

I haven't seen any particular proposal, but happy to take it back.

Happy to take it back. I'm out of time. But I gotta say, trying to backpedal on the question of whether or not these guys should make trillion dollar bets and then be able to turn around and say to the American public, the taxpayers are gonna bail us out. We did that in two thousand eight. We shouldn't be doing it again. Sorry, Mister Chairman, I apologize.

Senator Reynolds.

Thank you. L- l- la- first of all, let me just thank you all for being here. And second of all, I really appreciated the opening statements that all of you provided. Um, Mister Flynn, I'm just gonna begin with you, um, do you know of any bailouts requested by any of the current AI companies?

Not to my knowledge, Senator.

Does anybody know of any bailouts that are being requested by any of the AI companies? See, here here's the deal. I think it's fair to say in this country, we recognize that artificial intelligence is here and it's not going away. The real question is, is China gonna lead in AI development and take the opportunities, or is the United States going to take the lead and be the place where the AI development actually occurs? In the United States, we believe that it should be for the betterment of everybody, and that the developments are such that it will grow our economy. Mister Flynn, has the development of artificial intelligence in the United States added to our GDP?

Absolutely, Senator.

Mister Kip, Mister Feith?

Yes, sir.

Mister Reinhart?

Indeed it has, yes.

Doctor West, Doctor Myers-West?

We've seen a number of places where the American public has already been feeling the the pain, and we have

You can't tell whether or not AI has actually developed or improved on GDP growth in the United States.

The the predominant factor has been the investment in AI infrastructures rather than AI itself.

So you see, what we've got right now is in the United States we've done everything we can on a bipartisan basis to make sure that the United States does not fall behind. If we don't do this correctly, uh, AI will be used in the defense of our country, but it'll also be used by China in offensive operations. Today, in the United States, we use it in both offensive and defensive operations. We're better than our adversaries are right now. That saves American lives long term. correctly, we have to make sure that this is the place where those development occur. That means that the rest of the world, which is also a market for artificial intelligence and the systems that literally people are gonna use, they're on the rails that are developed in the United States today. We don't want those rails to be China's rails. We don't want Huawei doing it. We don't want the companies there doing it and taking advantage of it. So, Mister Flynn, what happens if an organization such as NVIDIA is not allowed or is restricted from being able to market their products around the rest of the world. Does that mean then that China then has an advantage in terms of selling to the rest of the world?

Senator, I think this is a core question in this hearing. There's a there's an inherent tension that that needs to be addressed. And this is why the role of BIS is so profoundly important. Not just on on the export control side, on the enforcement side, but their ability to issue licenses in a timely fashion and to work with the regulated community. So the the information necessary to ensure that the US technology stack is is being used around the world.

Mr. Feith, I I really appreciated your background and the fact that you've indicated that while we need to continue to lead the world there also needs to be the appropriate way to make sure that we keep that away from other adversary company countries such as China. Today would it be appropriate if we were to get the Commerce Department additional resources to be able to monitor and to restrict that from getting into the wrong hands in China?

Yeah, certainly.

OK, it it it let me let let me run this by you again once on this thing here. Is there any reason that we should be trying to chase any one of these organizations, these hyper scalers, any reason why we should chase them out of the United States by trying to tax them at a higher rate than other businesses would be taxed?

Uh, no, I don't believe so.

Mister Flynn?

No, Senator.

Is there any advantage at all to the American people if another country, including China, takes the lead on the development of artificial intelligence in this once in a generation opportunity to advance GDP in our country?

Certainly not.

Goodness, no, I I I do not. Uh, I fear a world where China is leading on AI.

Can you imagine a world in which if you use artificial intelligence correctly, you can actually improve the quality of life for Americans? We don't talk about it much. But what happens as we integrate biomedical research and the development of artificial intelligence being able to make decisions at a very, very rapid pace? Mr. Flynn, does that make a difference for the quality of life for the American families?

Absolutely, Senator.

Mr. F- Feith, do you agree with that?

Yes, sir.

Mr. Reinhart, you've been kind of quiet today, but would it be fair to say that there are real opportunities for the American public to benefit from the development of artificial intelligence in the United States rather than in China?

Yes, uh, yes, very clearly, and I would say one thing I saw recently, an individual, uh, had a very rare, uh, complication to a heart medication and by putting it into chap gpt he realized that he needed to switch his heart medication so i think that these small stories are actually incredibly important for individual lives

thank you and look i'm i'm running out of time but here's the deal artificial intelligence is here it's not going away we've got to be able to do the right types of uh of guidelines for the development of it but we have to do everything we can to keep that development here in the united states both for economic development for the but for the quality of life that it proposes for the people that live in this country. Thank you, Mister Chairman.

Thank you, sir. Senator Reid.

Thank you very much, Mister Chairman. Uh, thank you, uh, to all the witnesses. Mister Feith, uh, there is concern, I I I heard a bit of the center around testimony, about, uh, providing China with H twenty and H two hundred chips. uh from nvidia and one reason and this is what i have heard from national security experts is china is very rapidly and very adeptly uh using those chips to expand its very sophisticated and indeed weaponized chips is that accurate

uh yes sir and i think we we have seen uh valuable testimony from the us military and elsewhere on that

now um they are, China is promoting uh, and promoting is an under S, understatement, the Huawei chips and other chips. Uh, they are not, I don't think, bringing the H twenty eight, two hundred chips in to displace their own chips. On the contrary, I think they're doing all they can to promote their own Huawei chips and others. Is that right?

That, that's right. They want very much to indigenize, uh, and they want to, um, gain so that they can not only satisfy their domestic market with Huawei chips, which right now they're way behind in their ability to do, but their ambition is to do so. And then beyond that they wanna then compete to export all around the world, uh against US chip makers and cloud companies.

So is it fair to say that the, what they really want from H twenty and H two hundred chips is to get the most advanced American technology they can, to incorporate in their chips, and also to, uh, incorporated in their sophisticated weapon systems?