What investment impacts are there from changes in U.S. technology policy towards China?

Recently, Trump has been active in the technology sector, with changes in his policy approach, particularly regarding technology policies towards China, which have attracted widespread attention.

From the perspective of reasons, since Trump's return to the White House, the "PayPal Mafia" has taken control of the decision-making and execution levels of U.S. technology policy, integrating corporate interest orientation with the MAGA ideology.

Domestically, it emphasizes relaxed regulation to promote innovation while driving local investment and production to boost employment. Externally, it views the export of the "American tech stack" as the core of its technology strategy, maintaining a tough stance towards China while also having a transactional mindset, where technology sanctions can be used as negotiation leverage.

Under the changing U.S. technology policy, our related industrial chains may benefit from the easing of semiconductor tariffs, the expansion of investments by tech giants, and the phased relaxation of AI chip regulations. Meanwhile, as the U.S.-China rivalry continues, the logic of domestic substitution will also be continuously strengthened.

Recently, Trump has been active in the technology sector, with changes in his policy approach, particularly regarding technology policies towards China, which have attracted widespread attention.

Domestically, Trump has relaxed regulations on artificial intelligence and promoted technology companies to expand their investments in the U.S. through tariff threats and tax incentives.

Externally, on one hand, Trump is pushing for an increase in the BIS budget and strengthening technology export controls towards China; on the other hand, he has also relaxed certain export control issues, such as those related to H20 chips, reflecting a clear "transactional mindset."

From the perspective of reasons, since Trump's return to the White House, the "PayPal Mafia" has taken control of the decision-making and execution levels of U.S. technology policy, integrating corporate interest orientation with the MAGA ideology.

To understand the technology policy approach of the Trump administration, one must start from its decision-making mechanism.

From an institutional perspective, the OSTP and PCAST are the highest decision-making bodies in the U.S. federal government regarding technology policy, while specific policy execution is undertaken by relevant cabinet departments.

After Trump's return to the White House, the "PayPal Mafia" (referring to the small circle of early PayPal executives and investors) has fully entered the core decision-making and execution levels of U.S. technology policy, with David Sacks and Michael Kratsios serving as heads of PCAST and OSTP, respectively. Their technology policy approach reflects a combination of corporate interest orientation and the MAGA ideology.

Domestically, it emphasizes relaxed regulation to promote innovation while driving local investment and production to boost employment.

In terms of regulation, the "PayPal Mafia" advocates for relaxed regulation to promote innovation, focusing on the growth of startups and compliance costs, opposing government subsidies and politicized issues like DEI, and emphasizing technological competitiveness and open-source models.

In terms of investment, they believe that capital expenditure is the core driving force of technological development, which can create jobs and promote the return of the industrial chain to the U.S.

In terms of infrastructure, they emphasize the construction of energy and power systems, advocating for expedited permitting processes to expand data centers and power grids, believing that computing power and energy determine AI's competitive position From an external perspective, viewing the "American technology stack" as the core of its technology strategy, while being tough on China, also involves a "transactional mindset," where technology sanctions can be used as negotiation leverage.

The so-called "American technology stack" is not a single product, but an overall package that includes chips, computing power, algorithms, applications, and standards, aimed at ensuring that overseas markets automatically embed an ecosystem led by American companies when using American technology.

For countries with payment capabilities, the U.S. may attempt to promote the adoption of American solutions through diplomacy and commerce; for underdeveloped countries, it may try to provide financing support through financial institutions such as export-import banks and the DFC.

On issues related to China, the "PayPal Mafia," considering ecological diffusion and corporate interests, exhibits a transactional mindset, where technology sanctions can be used as negotiation leverage.

However, being tough on China may still be its underlying tone, with policies emphasizing the enforcement strength and effectiveness of BIS export controls, proposing to provide BIS with enforcement tools including KYC verification, physical checks of data centers, operational scale monitoring, and log retention.

Under the changing U.S. technology policy landscape, our related industrial chains may benefit from a gradual easing of semiconductor tariffs, expansion of investments by tech giants, and a phased relaxation of AI chip controls, while the logic of domestic substitution will continue to strengthen amid ongoing Sino-U.S. competition.

In the short term, the expectation of easing semiconductor tariffs and the backdrop of expanding investments by U.S. tech giants may drive demand in the global industrial chain upstream and downstream.

In the medium term, prior to the APEC summit at the end of October, Trump may still primarily adopt a "transactional mindset" towards China, with AI chip export controls potentially easing in phases.

In the long term, the Sino-U.S. technology competition may persist, and the logic of domestic substitution will continue to strengthen.

Authors of this article: Yang Fan, Yao Yuan, et al., Source: CITIC Securities Research, Original Title: "Overseas Policy | What Investment Impacts Arise from Changes in U.S. Technology Policy Towards China?"

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