U.S. Defense Bill Sparks Tech Cold War with China Through Semiconductors and AI Controls

Annual Defense Bill Becomes Battleground for U.S.-China Tech Competition

As Washington grapples with a government shutdown, behind-the-scenes negotiations over the National Defense Authorization Act (NDAA) are quietly shaping the future of American technology policy toward China. The annual defense spending bill, which Congress has passed consistently since 1961, has evolved into a vehicle for lawmakers seeking to counter China’s technological rise through export controls, investment restrictions, and collaboration bans.

Annual Defense Bill Becomes Battleground for U.S.-China Tech Competition
Semiconductor Sales Face New Global Licensing Regime
Outbound Investment Controls Return to Legislative Agenda
Biotech Collaboration Faces New Restrictions
House Takes Different Approach with Drone Manufacturers
Political Dynamics Shape Final Outcome
Broader Implications for U.S.-China Technology Competition

Semiconductor Sales Face New Global Licensing Regime

The Senate’s version of the NDAA includes the controversial GAIN AI Act, which would establish a comprehensive licensing system for semiconductor exports to countries of concern, primarily targeting China. This legislation would require chip manufacturers to offer American businesses first refusal rights on orders destined for China, creating what critics argue would be an unprecedented intervention in global technology markets.

Industry leaders, including NVIDIA, have voiced strong opposition to these measures, warning that they could disrupt global supply chains and undermine U.S. technological leadership. The Biden administration has also expressed reservations, creating an unusual alliance between tech companies and the White House against congressional hawks.

Outbound Investment Controls Return to Legislative Agenda

Senate lawmakers have revived efforts to establish outbound investment regulations that would empower the Treasury Department to block American investments in Chinese technologies deemed critical to national security. The proposed restrictions would cover advanced semiconductors, artificial intelligence systems, quantum computing, and hypersonic technologies., as previous analysis, according to industry developments

This marks the third consecutive year that such measures have appeared in Senate drafts, though they have consistently failed to survive reconciliation with the House. The persistence of these proposals demonstrates the growing bipartisan concern about American capital and expertise flowing to Chinese technology sectors.

Biotech Collaboration Faces New Restrictions

A revised version of the BIOSECURE Act included in the Senate’s NDAA would prohibit federally funded projects from collaborating with designated Chinese biotechnology companies. The new draft attempts to address constitutional concerns by removing specific company names and delegating designation authority to the executive branch.

While the modified approach has generated less immediate controversy than last year’s version, the fundamental tension remains between national security concerns and the benefits of international scientific cooperation. The biotech industry watches carefully as these provisions could significantly impact research partnerships and drug development pipelines.

House Takes Different Approach with Drone Manufacturers

The House version of the NDAA focuses more narrowly on Chinese drone manufacturers DJI and Autel, calling for security reviews that could lead to import restrictions. This targeted approach contrasts with the Senate’s broader technology restrictions, reflecting different strategic priorities between the chambers.

The House’s measured stance on drones, combined with its omission of the Senate’s more comprehensive technology controls, suggests significant negotiations ahead as lawmakers work to reconcile competing visions for managing technological competition with China.

Political Dynamics Shape Final Outcome

The path forward for these various China-focused technology restrictions remains uncertain. Several factors complicate the legislative process:

White House Opposition: The administration’s reservations about the GAIN AI Act and preference for executive action create headwinds for comprehensive legislative solutions
House Resistance: The House’s historically cautious approach to sweeping technology controls continues this year
Industry Pressure: Technology companies maintain significant influence, particularly regarding measures that could impact their global operations
Government Shutdown: The ongoing funding lapse threatens to delay NDAA negotiations, potentially pushing final passage into 2026

Broader Implications for U.S.-China Technology Competition

These legislative efforts represent the latest front in the escalating technological competition between the United States and China. The outcome will signal whether Congress prefers a surgical approach targeting specific security concerns or a broader decoupling of the two nations’ technology ecosystems.

As the conference committee begins its work, the technology industry, national security agencies, and international partners all await clarity on how aggressively the United States will weaponize its economic and technological advantages in what many are calling a new tech cold war.

The final NDAA, expected by year’s end or early 2026, will reveal whether American lawmakers can balance security concerns with the practical realities of global technology interdependence. The decisions made in these coming weeks could reshape international technology flows for years to come.