Stock Market Plunge Following 'AI Development Won't Stop' Declaration: A New Stage in the US-China Hegemony Struggle

On September 24, 2026, at the US-China summit, both countries expressed a common understanding that “AI development will not stop.” However, immediately afterward, the market reacted with the Nasdaq 100 index falling 1.7%, the Philadelphia Semiconductor Index dropping significantly by 6%, and SoftBank Group shares plummeting by 13.2%.Akihito Kobayashi, “Trump and Beijing Agree ‘AI is Dangerous But Won’t Stop,’ Deep Rifts in US-China AI Hegemony Exposed by AI Development Slowdown Arguments [Generative AI Case Files] Trump Administration Views Regulations as Conspiracies, China Responds with Containment and Backlash, New Management Decisions Looming for Japanese Companies (4/4)”. Why was the agreement to “continue development” perceived by investors as a signal for a slowdown? The background lies in the reality that political pressure is overriding corporate voluntary safety measures, and technology supply chains are being reorganized.

The market interpreted ‘safety arguments’ as geopolitical risk

Voices calling for a “slowdown in development” had previously emerged from the AI industry. This was prompted by concerns over technical safety. However, this movement was rapidly corrected by the political demands of both the US and ChinaAkihito Kobayashi, “Trump and Beijing Agree ‘AI is Dangerous But Won’t Stop,’ Deep Rifts in US-China AI Hegemony Exposed by AI Development Slowdown Arguments [Generative AI Case Files] Trump Administration Views Regulations as Conspiracies, China Responds with Containment and Backlash, New Management Decisions Looming for Japanese Companies (4/4)”.

The US Trump administration viewed moves to regulate or slow down AI development as a “conspiracy” and instead insisted on acceleration. Meanwhile, China also issued a “won’t stop” declaration as a backlash against US containment policies, demonstrating a confrontational stance.

As a result, the term “AI safety” itself began to be interpreted by the US as a tool for containing China, and by China as a means of inciting fear. The market appears to have read this situation not as a “technical safety debate” but as a “deterioration of the investment environment due to geopolitical conflict,” leading to a risk-off move.

The meaning of the shift in semiconductor regulations to ‘individual review’

US semiconductor export policy toward China reached a major turning point around January 2026. Rather than a simple “total embargo” as had been considered previously, it is being adjusted in a direction that balances national security with the competitiveness of US companiesIruka-kun, “What happened to the US-China friction over semiconductors? Looking back at the regulations by the former Biden administration”.

Specifically, the US Department of Commerce changed its policy to “individual review with certain safety conditions” for export license applications to China for high-performance chips such as NVIDIA’s H200 and AMD’s MI325X. This also follows the trend of the “AI Diffusion Rule” introduced by the former Biden administration being withdrawn by the Trump administration.

This shift indicates that the US is aiming for “managed access,” where US companies maintain market share while preventing the leakage of state secrets, rather than completely cutting off China’s technological development. On the other hand, China is accelerating investment in its domestic semiconductor industry and advancing the construction of its own technology system, and the aspect that US regulations are having the counterproductive effect of encouraging China’s self-reliance in the long term cannot be ignored.

New standards forcing Japanese companies to choose vendors

Such geopolitical tensions are changing the evaluation criteria for Japanese companies when purchasing and introducing AI technology and semiconductors. Previously, “performance,” “cost,” and “ease of implementation” were the main decision-making factors, but now it has become necessary to consider “how that company’s safety policy conflicts with the geopolitical stance of its home government”Akihito Kobayashi, “Trump and Beijing Agree ‘AI is Dangerous But Won’t Stop,’ Deep Rifts in US-China AI Hegemony Exposed by AI Development Slowdown Arguments [Generative AI Case Files] Trump Administration Views Regulations as Conspiracies, China Responds with Containment and Backlash, New Management Decisions Looming for Japanese Companies (4/4)”.

For example, if an AI vendor restricts its services in compliance with US export regulations, what impact will that have on the business continuity of a Japanese company? Furthermore, there is a possibility that the vendor’s safety standards could be perceived differently by different countries, whether they are merely technical considerations or political statements regarding economic security.

Japan’s AI governance is also not immune to US export regulations and policies toward China. In a phase where technological progress, political pressure, and market reactions are all pointing in different directions, management decisions that take into account the risk of these factors diverging are required.

Summary

• The stock market plummeted immediately after the US and Chinese leaders declared that “AI development will not stop” because “safety arguments” were used as tools for geopolitical conflict, increasing uncertainty in the investment environment.

• US semiconductor export regulations have shifted from a “total embargo” to “individual review and conditional approval,” aiming to balance national security with corporate competitiveness, leading to the fragmentation and reorganization of technology supply chains.

• When choosing AI vendors, Japanese companies need to add the consistency between the company’s safety policy and its home government’s geopolitical stance to their evaluation criteria and manage supply chain risks caused by political pressure.

Going forward, attention will likely be focused on the detailed operational status of individual review criteria and the extent to which China’s domestic semiconductor technology can fill the “loopholes.”

References

Read also

This is an article for readers who run local LLMs on their own machines. Local LLM: Output changes even with the same prompt. Fixing the seed to ensure reproducibility