The U.S. Treasury is proposing new rules to restrict American capital from flowing into certain foreign countries for investments in artificial intelligence and semiconductors, signaling a significant tightening of oversight on outbound investments.
Tightening the Reins on Capital Flow
Washington has long focused on controlling the export of advanced chips. Now, the emphasis is shifting to scrutinizing where U.S. dollars are invested to develop these technologies abroad. This proposed regulation builds upon an existing framework that has already resulted in penalties and is slated for expansion by Congress.
The Outbound Investment Security Program
At the core of this initiative is the Outbound Investment Security Program (OISP), which became effective on January 2, 2025. The program specifically targets investments by U.S. persons in certain Chinese entities operating in critical sectors: semiconductors, quantum technologies, and artificial intelligence. The OISP operates on a two-tiered system, with some transactions being outright prohibited and others requiring notification to the Treasury Department.
The program’s genesis lies in Executive Order 14105, issued on August 9, 2023, which established the policy direction. The Treasury Department subsequently developed the enforceable rules. The stated objective is to safeguard national security by preventing U.S. capital and associated expertise from bolstering sensitive technologies in countries deemed strategic competitors by Washington.
Early Enforcement and a Landmark Penalty
The Treasury Department demonstrated the program’s enforcement capabilities on October 7, 2026, when it announced its first civil penalty under the OISP. Amidi, LLC, was fined $200,000 for failing to report an investment of $92,478. This investment was made by Amidi’s Chinese subsidiary into Shanghai Qiongche Intelligent Technology, also known as Noematrix.
Noematrix specializes in embodied AI and robotics, a field that integrates artificial intelligence with physical machines capable of operating in the real world. The penalty imposed was more than double the value of the unreported investment, underscoring the seriousness with which such violations are being treated. This case also highlighted the potential for indirect investment flows, as the funds moved through a Chinese subsidiary of a U.S. company rather than directly from an American entity.
Legislative Expansion: The COINS Act
The new proposal is part of a broader legislative effort. On December 18, 2025, the Comprehensive Outbound Investment National Security Act of 2025, or COINS Act, was signed into law. This legislation aims to expand the OISP’s reach by broadening its coverage to include additional countries and incorporating new technology sectors. Among the newly added sectors are high-performance computing and hypersonic systems, complementing the existing focus on semiconductors, quantum technology, and AI.
The COINS Act also mandates that the Treasury Department finalize new rules by March 2027. As of October 2026 updates, the Treasury had indicated plans to release proposed regulations related to the COINS Act within weeks, providing the backdrop for the current proposal concerning AI and semiconductor investments.
Navigating the Evolving Landscape
While the proposed rules are not yet final and could undergo changes, the overall direction appears set. The immediate implications are for U.S. investors with exposure to foreign technology companies, including venture capital firms, private equity funds, and corporations with international subsidiaries. The broad definition of AI, as illustrated by the Noematrix case, means that companies identifying as robotics or software startups could still fall under the program’s purview.
The expansion to additional countries introduces a new layer of complexity, as the program’s focus has historically been on Chinese entities. This shift will necessitate adjustments to compliance processes for businesses operating globally.
Several key developments warrant close observation. Firstly, the specific countries that the Treasury ultimately designates will determine the program’s geographical scope beyond China. Secondly, the precise definitions of covered activities within AI and semiconductors will be crucial for compliance. Thirdly, the March 2027 deadline for finalizing rules under the COINS Act will dictate the pace at which firms must adapt. Finally, the enforcement pipeline, marked by the initial penalty against Amidi, will signal the aggressiveness with which the expanded regulations are likely to be policed.
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