Sweeping new export controls for advanced AI chips and models are sparking fury from industry players who see an opportunity to secure changes through the incoming Trump administration.

Why it matters: Republicans have to make peace with competing goals — to foster innovation through deregulation and to put guardrails up in the name of national security.

• How these rules are handled will be an early test.

State of play: There is a 120-day window to give the incoming administration feedback on the rules, which Commerce Secretary Gina Raimondo says she fully expects could result in changes.

The rules could run up against Elon Musk's government efficiency project.

• A senior administration official said Commerce's Bureau of Industry and Security has agents around the world and law enforcement support to set up the licensing regime, but could use more.

Between the lines: The rules don't apply to China. They apply to the rest of the world.

• Companies can continue exporting advanced chips and AI models freely to 20 allied nations.
• Arms-embargoed countries were already cut off from advanced chips and they will now also be cut off from advanced models.
• All other countries will be subject to license requirements.

Some in industry say the rules will do nothing to boost national security and instead will undermine U.S. competitiveness.

• The Semiconductor Industry Association said the new rules will cause unintended consequences, and noted several regulations have already been implemented in recent years to restrict advanced chips.
• ITIF, a tech think tank, laid out alternative policies, including expanding market access for chips and AI, focusing on lawful and beneficial AI exports, and recognizing the economic implications of chip sourcing decisions.

Zoom in: Nvidia in a blog post said the rules would "control technology worldwide that is already widely available in mainstream gaming PCs and consumer hardware."

• There are exemptions in the rules that would allow for the flow of such products, but Nvidia's Tim Teter told Axios they create a "legal morass."
• The rules cover compute thresholds that Nvidia achieved a long time ago, and there are undefined terms around chips intended for data centers that create risk and uncertainty.
• "That's why thank heavens for the 120 days, because we're going to have to get the Trump administration to look at this," Teter said.

The other side: The point of the licensing regime is to increase the government's visibility into shipments. That visibility would make it harder for China to gain access to U.S. chips through third countries.

• Smuggling to China, including Nvidia AI chips, is a broadly recognized problem.

If you need smart, quick intel on federal tech policy for your job, get Axios Pro Policy.

Samsung topped the list of most U.S. patent grants for the third straight year, while Huawei and other Chinese companies saw a significant increase in patent awards in 2024, according to new data from IFI Claims.

Why it matters: Patents aren't a direct proxy for innovation, but they are an indicator of which companies are both investing in research and looking to protect their intellectual property.

By the numbers: Chipmaking powerhouse Taiwan Semiconductor Manufacturing Co. (TSMC) supplanted Qualcomm for the No. 2 spot, with Apple rising three places to claim the No. 4 spot.

• China's Huawei rose six places to No. 5 on the list, thanks to a 47% year-over-year increase in patents granted.
• IBM, once the undisputed patent king, fell another four places to No. 8. The company announced several years ago that it would be more selective in its patent filings.
• Overall, U.S. companies accounted for 56% of the U.S. patents granted, followed by those from Japan, China, South Korea and Germany.
• Applications by Chinese companies were up 32% from 2023.

Zoom in: Looking at the subject matters of new patent applications, AI-related work appears to be cooling some after years of significant growth.

• "Despite all the market's attention on AI, we saw technologies like machine learning — which underpins artificial intelligence — slope downward," said IFI Claims CEO Ronald Kratz. "But we're not surprised by that. Those were the fast growers that preceded the present AI bonanza and have been on our list in the years leading up to it."

Between the lines: The overall number of patents granted, which had been declining for the past four years, rose 3.8% from calendar year 2023 to 324,043.

• "It's good to see patent grants heading in the right direction again," Kratz said in a statement. "The USPTO has been hiring more examiners to deal with the accumulation, so it looks like that's having a positive effect."

Yes, but: The Patent Office still has a large and growing backlog of applications waiting to be examined. There were 813,000 unexamined applications as of 2024, up from 750,000 from the prior year and around 540,000 before COVID, per IFI.

• President Biden issued an executive order to accelerate the construction of data centers that power AI. (Axios Pro)
• Here's what could happen to TikTok on Jan. 19. (Axios)
• Microsoft has tapped former Meta executive Jay Parikh to head a new "core AI" team that aims to rebuild developer efforts, for both internal use and customers, around AI. (The Verge)
• A test of two popular financial-advice AI chatbots found they steer users toward costly cash advances and loans. (Wired)
• Amazon's effort to rebuild its Alexa voice assistant on a foundation of generative AI is still struggling to make sure the bot doesn't make things up. (Financial Times)
• At least eight Americans have been falsely arrested after more than a dozen police departments nationwide have started using facial recognition software as a shortcut to finding suspects. (Washington Post)

A belated tip of the hat to Mayuren Naidoo, who made it his mission to visit the famous real-world works of art that appear within the Nintendo Switch version of Animal Crossing.