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US Treasury moves to ban investment in Chinese AI firms

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A US Treasury proposed rule would bar Americans from investing in companies in China and other countries of concern that develop any AI system. Many such deals currently only require notification.

By: Mikola Máté Patrik · · 2 min read

Seal of the U.S. Department of the Treasury on a blue background
Image: U.S. Department of the Treasury · Public domain (US gov) · U.S. federal government work · Source

What happened?

On October 22, the US Treasury issued a notice of proposed rulemaking (NPRM) to implement the COINS Act (Treasury), passed by Congress as part of the Fiscal Year 2026 National Defense Authorization Act. The law codifies outbound investment controls that Treasury has run through its Outbound Investment Security Program (OISP).

What changes for AI

According to the fact sheet, the proposal broadens the prohibition: US persons could not invest in country-of-concern entities that develop any AI system. That would eliminate the existing notification tier for these deals, making them simply prohibited.

The text refers to “super intelligence systems” (SI systems) rather than AI. That follows Executive Order 14434 of September 29, which requires agencies to use “SI” in place of “AI” in certain documents. In substance it replaces the current “AI systems” category.

Other changes

  • Countries of concern: Cuba, Iran, North Korea and Russia would join China (including Hong Kong and Macau). The fact sheet says Venezuela no longer qualifies.
  • New sectors alongside semiconductors, quantum and AI: high-performance computing and supercomputing, hypersonic systems and biotechnology.
  • Exceptions include publicly traded securities, investment funds and LP investments up to $2 million. Deals totaling no more than $50,000 over 12 months would be exempt from notification only.
  • A new process would let parties request non-binding feedback on whether a transaction is prohibited.

Timeline

Comments are due December 7, 2026. Treasury will then issue final regulations that set an effective date. Until then, the current OISP rules apply.

Why it matters

If adopted as proposed, US venture capital would be effectively cut off from Chinese AI developers, whether they build models or applications. The rule applies to US persons, but European funds and startups with US investors and stakes in Chinese AI companies may also need to review their exposure.

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