The Commerce Department today issued AI export controls aimed at ensuring China does not gain access to U.S. tech through third countries.

Why it matters: The Export Control Framework for AI Diffusion is the Biden administration's final swing at China's AI industry.

• The new regulation is meant to keep AI from fueling Beijing's military development, administration officials say.

What's inside: The rule will create a new global licensing system for the most advanced AI technology exports.

• Companies can continue to export to 20 allied nations freely. But they'll face some restrictions for non-allied countries and will be prohibited entirely from exporting to U.S. adversaries.
• Supply chain activities are excluded so chips can move where they need to be packaged or tested.
• Chip orders worth less than roughly 1,700 advanced GPUs total do not require a license and do not count against national chip caps. That allows for the vast amount of orders being placed, including by universities, medical institutions and research organizations.
• To build data centers around the world, companies from the U.S. and certain partner countries will only need a single authorization from Commerce's Bureau of Industry and Security.

Between the lines: The new rules also aim to tighten security around the critical specifications for the most advanced frontier AI models.

• The model weights for those models — essentially, the numbers that summarize the models' training and fine-tuning — are now barred from "transfer to non-trusted actors." The rule does not apply to open-source models.

Winners: China hawks on the Hill pushed the Biden administration to impose clear red lines in the name of national security and winning the tech race.

Losers: Nvidia, Oracle and industry groups say the rules will undermine American competitiveness and hinder innovation.

Threat level: A senior administration official said U.S. models are 6 to 18 months ahead of China's right now and "every minute counts."

• If the controls were frozen by the incoming administration, China would stockpile U.S. hardware and try to set up remote compute facilities in third countries, the official said in a call with reporters.

What they're saying: Senate Commerce Committee chair Ted Cruz (R-Texas) said the rules are a Biden administration effort "to try and jam President Trump" and will "crush American semiconductor leadership."

• Brad Carson, president of policy advocacy group Americans for Responsible Innovation, lauded the rules as "national security 101."
• Groups like ARI want to take export controls even further to account for open-source models.

What we're watching: The Trump administration will need to weigh its protectionist approach with the desire to beat China.

• Commerce is giving companies a year to come into compliance with the rules, with a 120-day comment period that Secretary Gina Raimondo said will give the next administration an opportunity to gather input.
• "I fully expect the next administration may make changes as a result of that input," Raimondo said on a call with reporters on Sunday.

A version of this story was published first on Axios Pro. Unlock more news like this by talking to our sales team.

OpenAI Monday released a list of recommendations around AI competition and regulation — an "economic blueprint" the company is using to kick off a new era of tech policy.

Why it matters: The ChatGPT maker is looking to solidify its position in Washington as a new administration takes power — and Elon Musk, who has feuded with and sued the company, heads to D.C. at Trump's side.

OpenAI's chief goals in the blueprint include:

• Promoting U.S.-made AI to insure the new tech isn't "shaped by autocrats" and authoritarian governments, chiefly China.
• Insuring equitable access to AI and its benefits "from the start."
• "Maximize the economic opportunity of AI for communities across the country" rather than just in coastal tech enclaves.

What they're saying: AI "is an infrastructure technology, it's like electricity," and right now, "there's a window to get all this right," OpenAI VP for global affairs Chris Lehane told Axios.

Key recommendations in OpenAI's blueprint:

• Nationwide "rules of the road" for AI should "preempt a state-by-state tangle."
• Free up the export of advanced "frontier AI" models to "allies and partners" so they can "stand up their own AI ecosystems" based on U.S. rather than Chinese technology.
• AI builders could "form a consortium that identifies best practices for working with the national security community."
• Use the states as "laboratories of democracy" to build AI hubs focusing on their unique data — for instance, Kansas could focus on use of AI in agriculture — so AI jobs and expertise benefit every region.
• Ensure that AI "has the ability to learn from universal, publicly available information, just like humans do, while also protecting creators from unauthorized digital replicas."
• Require AI companies to provide "meaningful amounts of compute" to public universities.
• Streamline and expand support for building new data centers across the U.S. — and "dramatically increase" federal investment in existing and new energy sources and the power grid needed to support them.

Between the lines: Microsoft, Google and other tech giants have many big irons in the Washington fire and face regulatory scrutiny and antitrust lawsuits on multiple fronts.

• OpenAI, by contrast, is still a young company with a singular focus on building advanced AI.
• The company knows that, with Musk, it has a vocal enemy in the incoming administration's highest councils. It wants to make the case for the tangible benefits — jobs and investment — it can offer both blue- and red-state communities.

The bottom line: Lehane frames OpenAI's recommendations as an effort to prove once again the U.S.'s historic ability to "think big, act big, build big" — and keep an edge over China in the global AI race.

• "We've identified $175 billion in dry powder for AI infrastructure that exists internationally right now" — investments in AI that are going to be made soon and quickly, Lehane told Axios. "Is that money going to come to the U.S. or is it going to go to support potentially PRC-led infrastructure?"

• The United Kingdom is looking to boost its AI computing capacity in hopes of spawning a homegrown rival to OpenAI and others. (CNBC)
• Apple will play catch-up on AI in 2025. (Bloomberg)
• Overland AI, a startup that makes military software for controlling fleets of robots, raised $32 million in a round led by Joe Lonsdale's 8VC. (Axios)

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Yes, but: They cost nothing if you just leave them there.