US Congress extends outbound investment screening to AI
The FY2026 National Defense Authorization Act (NDAA), signed into law in December 2025, contains 37 AI-related provisions — including a major expansion of the US outbound investment screening regime to sensitive AI technologies. The Treasury can now prohibit, not merely require notification for, certain US investments in AI abroad.
The National Defense Authorization Act (NDAA) for fiscal year 2026, signed into law in December 2025, contains 37 distinct AI-related provisions — a figure that illustrates how far the annual defense bill has become, in practice, a vehicle for US technology policy. According to the Emerging Technology Observatory's (ETO) AGORA database, which tracks over 1,000 AI-related laws and policies worldwide and added 45 of them in the last three months alone, this NDAA ranks among the densest AI-related texts since the current US regulatory framework took shape.
The most economically significant provision, Section 8521, amends the Defense Production Act to extend the US outbound investment screening regime to AI technologies. The Treasury Secretary can now outright prohibit certain US-person investment transactions involving AI technologies designated as "prohibited," going beyond the mandatory notification regime that previously applied only to "notifiable" technologies. Civil penalties and divestment requirements apply for noncompliance, alongside a stated intent to coordinate with allies. The Treasury Secretary has yet to issue the implementing regulations.
Other provisions in the same law round out the picture: Section 1532 requires the Department of Defense to remove any AI developed by DeepSeek or High-Flyer from its systems within 30 days of enactment, barring contractors from using such technology in Pentagon contracts (case-by-case waivers allowed). Sections 1534 and 1535 create, respectively, a task force on AI regulatory sandboxes and a committee on advanced AI trajectories, both due by April 2026. The law follows a December 2025 executive order setting a unified federal AI policy framework, partly aimed at containing the proliferation of divergent state-level legislation.
For Cardan-AI, this expansion of outbound investment screening marks a turning point: AI now joins advanced semiconductors in the category of technologies where Washington explicitly chooses to restrict the free flow of American capital rather than leave allocation to the market alone. Companies in our target sectors considering technology partnerships, joint ventures, or stakes in AI start-ups abroad — including through US subsidiaries — will now need to factor this regulatory filter into their diligence, well ahead of standard financial due diligence.
Analysis by
Cardan-AI Intelligence
Our research and analysis unit, dedicated to applied AI for business, industry and regulatory compliance.
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