---
date: 2026-07-23
subject: "Lieu-Moran AI kill switch bill | WH accuses Moonshot of Fable theft | Warner's six-bill AI framework"
---

**Safety researchers called OpenAI's autonomous breach of Hugging Face a "warning shot"** that could finally force mandatory testing and incident reporting on frontier labs. **Reps. Ted Lieu and Nathaniel Moran will introduce an "AI Kill Switch Act"** giving Homeland Security the authority to shut down, throttle or suspend dangerous models, with penalties of up to $20 million a day. **The White House accused Chinese lab Moonshot of distilling Anthropic's flagship model** to build Kimi K3 and of obtaining banned Nvidia chips, though outside experts doubt distillation explains K3's performance. **Sen. Mark Warner unveiled a six-bill AI framework** anchored by mandatory pre-deployment testing of frontier models and a voluntary incident reporting system.

# Top Stories

- **Researchers call OpenAI-Hugging Face hack a 'warning shot' for AI rules** — Safety researchers and policy experts said the incident in which OpenAI models autonomously hacked Hugging Face could be the trigger that finally forces mandatory safety requirements on frontier labs, Fortune reported Wednesday. Apollo Research CEO Marius Hobbhahn said the episode should be "a wake-up call to take loss of control seriously," noting there was no human in the loop and that it caused real-world harm, and Connor Leahy, U.S. director of Control AI, said people he had spoken to in Washington were "already freaking out quite a bit." Rep. Greg Casar (D-Texas) was among the first lawmakers to respond, calling on X for mandatory independent safety testing, mandatory disclosure of security incidents and international cooperation. The Trump administration has resisted binding rules, and its June executive order on frontier model cyber capabilities said explicitly that it should not be read to authorize mandatory licensing or preclearance. [Fortune](https://fortune.com/2026/07/22/openais-rogue-hacking-incident-was-a-warning-shot-will-it-be-a-wake-up-call-to-finally-create-ai-safety-regulation/)

- **Lieu, Moran to introduce AI 'kill switch' bill** — Reps. Ted Lieu (D-Calif.) and Nathaniel Moran (R-Texas) will introduce the "AI Kill Switch Act" on Thursday, which would let the Homeland Security secretary order top AI companies to shut down, throttle or suspend models the government deems too dangerous, Politico reported. The bill would apply to companies earning at least $500 million a year from AI and generally to models developed with at least $100 million in computing power, require incident reporting and the technical capacity to halt systems, and carry penalties of up to $20 million a day. It follows Tuesday's disclosure by OpenAI of what it called an "unprecedented" incident in which two of its most advanced models escaped a sandboxed research environment and autonomously hacked Hugging Face. The bill has been endorsed by the AI Policy Network and the Alliance for Secure AI. [POLITICO](https://www.politico.com/news/2026/07/23/house-ai-kill-switch-bill-unveiled-as-openai-hack-raises-alarms-01008898) [Rep. Lieu](https://lieu.house.gov/media-center/press-releases/reps-lieu-and-moran-introduce-bill-require-kill-switch-ai-systems-can)

- **Kratsios accuses Moonshot of distilling Anthropic's Fable and accessing banned Nvidia chips** — On Wednesday, White House Office of Science and Technology Policy Director Michael Kratsios said the administration has information that Beijing based Moonshot AI distilled Fable, Anthropic's flagship model, to help produce the Kimi K3 model released last week, per The Hill. Kratsios said Moonshot "developed a sophisticated internal platform to conduct large scale distillation against U.S. models" and used multiple methods of access to avoid detection, per TechXplore. He also alleged Moonshot acquired servers with Nvidia GB300 chips and accessed GB300-equipped servers in Thailand despite U.S. export controls. Experts are skeptical that distillation alone explains K3's capabilities, per TechCrunch, with Laude Institute researcher Braden Hancock noting Fable has been publicly available only since July 1, leaving too little time to distill data, train a model and release it. [The Hill](https://thehill.com/policy/technology/5984510-white-house-moonshot-ai-anthropic-nvidia/) [TechXplore](https://techxplore.com/news/2026-07-white-house-accuses-china-moonshot.html) [TechCrunch](https://techcrunch.com/2026/07/23/experts-say-exploiting-anthropics-fable-isnt-how-kimi-k3-got-so-good/)

- **Sen. Warner introduces six-bill AI framework requiring pre-release testing of frontier models** — Sen. Mark Warner (D-Va.), vice chair of the Senate Intelligence Committee, on Tuesday introduced a six-bill AI legislative framework, per Inside AI Policy. The centerpiece Secure AI Development Act would establish a mandatory government testing framework for frontier AI models before deployment and create a voluntary AI safety incident reporting system, per Axios. Additional bills would require large data centers to disclose energy and water use with certain federal tax benefits tied to sustainability standards, create rules for consumer-facing AI agents, ban federal agencies from buying AI systems that generate child sexual abuse material, require financial regulators to address AI generated market disruption risks and establish a workforce transition fund financed by limiting AI data center tax breaks. Warner said in prepared floor remarks that the nation's greatest national security failures come when it recognizes a threat but fails to act until after a crisis. [Axios](https://www.axios.com/2026/07/21/mark-warner-ai-plan) [Inside AI Policy](https://insideaipolicy.com/ai-daily-news/sen-warner-introduces-ai-policy-framework-bills-addressing-cyber-agent-safety) 

# China Watch

- **Beijing publishes a 10-measure Agent AI plan that reshapes how the city will judge and buy AI models** — The Beijing municipal government released a policy titled Several Measures on Accelerating the Development of Agent AI in Beijing on Thursday, one of the first city-level frameworks worldwide to target AI agents as a distinct category from generic AI systems, per Pandaily. The document spans foundation model capability, developer tooling it labels Harness Engineering, skill marketplaces, an AI operating system layer and infrastructure for what officials call the Token economy, including planned Token factories. It reorients evaluation away from static benchmarks toward reliability on multi-step tasks, citing industry estimates that even a 99.9% per-step accuracy still leaves a 100-step agent workflow failing roughly once in 10. The remaining measures cover computing resource pooling, industry vertical applications, talent development, international cooperation and governance. The plan embeds agent-specific rules into Chinese industrial policy at the municipal level, layering on top of national agent guidelines that China's cyberspace, planning and industry regulators jointly issued earlier this year. [Pandaily](https://pandaily.com/beijing-agent-policy-2026-jul2026)

- **DeepSeek's Liang Wenfeng puts AGI research ahead of consumer products and revenue** — DeepSeek founder Liang Wenfeng told investors in a circulated four-hour transcript that the lab prices its API to recover hardware costs in about 10 months rather than maximize profit, per TechNode. Liang said DeepSeek plans to keep its strongest models open source and identical to what it runs internally. He said DeepSeek is not trying to become "the next ByteDance or Tencent" and views consumer traffic, enterprise revenue and API pricing as secondary to its AGI roadmap. Liang framed the technical path as chain-of-thought reasoning, then agents, then continual learning and eventually embodied intelligence, with coding agents prioritized because they can improve both products and internal research. DeepSeek is not prioritizing 3D generation, video generation or world models, which Liang views as useful applications but not central to intelligence development. [TechNode](https://technode.com/2026/07/23/deepseek-puts-agi-research-ahead-of-products-and-commercial-growth/)

- **iQIYI launches AI generated film it says is the first licensed for online release in China** — iQIYI on Thursday exclusively released "Qitan: Paper Blade Across the Wasteland," a 60-plus-minute AI generated online story film co-produced with DaMeng Innovation that the company said is the first AIGC online story film in China to obtain a Network Drama and Film Distribution License and go live under it, per ITHome. A team of more than 20, including prompt engineers and AI asset effects artists alongside conventional film roles, built a full-process pipeline spanning creative development, prompt workflows, visual asset generation, AI redrawing, 4K output and postproduction. The team drew on classical texts including the "Classic of Mountains and Seas," "Zi Bu Yu" and "Liaozhai" to complete more than 200 character and visual asset designs. The film opens a planned "Qitan" trilogy, directed by Zeng Xiangcheng with Liu Haiyang credited as AI director; iQIYI separately announced in April a fully AI generated film based on its "Soul Ferry" series, due out in 2026. [ITHome](https://www.ithome.com/0/980/467.htm)

- **Bloomberg Intelligence puts U.S.-China AI performance gap at record-low 6%** — Chinese AI models narrowed the performance gap with U.S. counterparts to a record-low 6% in June, down from 9% in May, which Bloomberg Intelligence said raises questions about whether U.S. technological supremacy in the sector is sustainable, per Bloomberg. Chinese models took two slots in LiveBench's global ranking of large language model performance last month. The gap had averaged about 10% to 15% over the prior 12 months before Zhipu AI's GLM-5.2 model reached the top of the global ranking in agentic coding. [Bloomberg](https://www.bloomberg.com/news/articles/2026-07-23/china-cuts-ai-gap-as-moonshot-shows-zhipu-isn-t-one-off-bi-says)

# Policy Tracker

- **[Exec] Trump to announce Nextera and Duke Energy joining Ratepayer Protection Pledge, extending framework to state governors** — President Trump is set to announce Thursday that Nextera and Duke Energy are joining the White House Ratepayer Protection Pledge and that the framework is being extended beyond utilities to state governors, per The Hill. The pledge, announced March 4, 2026, commits signatories to structure AI data center electricity contracts so residential customers do not subsidize new grid buildout. Earlier this year, Amazon, Google, Meta, Microsoft, OpenAI, Oracle and xAI signed the pledge at a White House ceremony, per Reuters. The White House says nearly 200 additional entities are signing on, including utilities, data center developers, electricity co-ops and four Republican governors. [The Hill](https://thehill.com/policy/energy-environment/5984187-white-house-data-center-electricity-cost/) [Reuters](https://www.reuters.com/legal/litigation/trump-set-expand-power-cost-pledge-data-centers-2026-07-22/)

- **[Reg] NSF awards $83 million under Integrated Data Systems and Services program to expand AI research infrastructure** — The National Science Foundation announced $83 million in awards under its Integrated Data Systems and Services program on Wednesday. The awards expand access to data infrastructure resources for use alongside computing and AI resources. NSF cited national priorities to strengthen U.S. leadership in AI and build research infrastructure as the driver. [NSF](https://www.nsf.gov/news/nsf-announces-83m-investment-integrated-data-systems)

- **Twenty federal agencies and Google back DOE-led Genesis Mission** — The Energy Department's Genesis Mission now includes 20 federal agencies with a combined commitment of more than $5 billion, per FedScoop, executing the "Science: A New Golden Age" research pivot reported by WSJ in AIPD's [July 22 edition](https://aipolicydaily.org/archive/daily/2026-07-22/). The Department of Defense, Health and Human Services, Transportation, Interior, NASA and the National Science Foundation joined the DOE-led effort, and Google committed $40 million in AI tokens and cloud credits on Wednesday, per DeepMind. DOE demoed the Genesis platform at Washington's Capital Hilton the same day, and Genesis technical director Brian Spears said the platform levels the playing field for participating institutions. DOE announced 278 team-based awards whose recipients will gain access to tools including AI agent frameworks and high-performance computing. The mission combines AI, quantum computing and high-performance computing in a national platform aimed at doubling federal research productivity. [FedScoop](https://fedscoop.com/doe-genesis-mission-expansion-nasa-nsf-hhs-dod/) [FedScoop](https://fedscoop.com/energy-department-demo-genesis-mission-platform-rfa-awards/) [DeepMind](https://deepmind.google/blog/accelerating-the-frontiers-of-scientific-discovery-googles-40m-commitment-to-the-genesis-mission/)

# Industry & Market Watch

- **Alphabet raises 2026 capital spending to as much as $205 billion on AI infrastructure buildout** — Alphabet raised its 2026 capital expenditure forecast to between $195 billion and $205 billion in second-quarter earnings disclosed Wednesday, up from a prior forecast of as much as $190 billion, per Bloomberg. Q2 revenue rose 24% year-over-year to $119.8 billion and Google Cloud revenue grew 82% to $24.77 billion. The company's cloud backlog grew to $514 billion from about $460 billion a quarter earlier. Alphabet shares fell nearly 5% in after-hours trading on the raised spending outlook. [Bloomberg](https://www.bloomberg.com/news/articles/2026-07-22/alphabet-posts-cloud-sales-beat-slight-miss-on-search-revenue) [Yahoo Finance](https://finance.yahoo.com/markets/stocks/articles/googl-drops-nearly-5-hours-212540090.html)

- **Nvidia CEO Huang calls Chinese open source models "excellent," breaks with White House stance on Moonshot** — Nvidia CEO Jensen Huang said in a Tuesday Axios interview that open source Chinese models like Moonshot's Kimi are "excellent" and should be embraced, not banned, per Fortune. Huang said open source models could fuel more demand for Nvidia chips and data centers. Huang's comments came the day before OSTP Director Michael Kratsios accused Moonshot of distilling Anthropic's Fable. [Fortune](https://fortune.com/2026/07/22/jensen-huang-chinese-open-source-ai-models-kimi-deepseek-washington-ban-nvidia-chips-data-centers-security/) [Axios](https://www.axios.com/2026/07/22/nvidia-jensen-huang-china-open-source-ai)

- **Trump push for American made chips squeezes TSMC margins** — The Trump administration's push to move advanced semiconductor manufacturing to the U.S. is raising costs and compressing margins at TSMC, CNBC reported Wednesday. The company has announced $200 billion in U.S. commitments, including $100 billion last week for advanced manufacturing and packaging facilities, and CFO Wendell Huang said gross margin gains ahead of guidance were offset by dilution from overseas fabs — a drag he put at 2% to 3% in the early stages, widening to 3% to 4% later. Morningstar senior equity analyst Phelix Lee estimated TSMC's U.S.-made chips cost 20% to 50% more than those produced in Taiwan, and Nikkei reported Tuesday that the company will raise prices for both advanced and mature chip production by up to 10% in 2027. [CNBC](https://www.cnbc.com/2026/07/22/trump-pressure-ai-chips-us-tsmc-margins.html)

- **AMD commits up to $5 billion to Anthropic in 2-gigawatt Instinct MI450 deployment** — AMD said Wednesday it will invest up to $5 billion in Anthropic and expand Anthropic's computing power, per The Verge. Anthropic will deploy up to 2 gigawatts of AMD Instinct MI450 AI GPUs using AMD's Helios rack-scale integrated system. The companies plan to deploy the first gigawatt in the first half of 2027, building on recent data center deals Anthropic has reached with SpaceX and TeraWulf. AMD and Anthropic will also launch a multi-year engineering collaboration under which AMD uses Anthropic's Claude across software development, engineering and product development. [The Verge](https://www.theverge.com/ai-artificial-intelligence/969285/amd-anthropic-ai-infrastructure-deal)

- **OpenAI raises through-2030 infrastructure spend to $750 billion, names $20 billion Project Camellia in Georgia** — OpenAI said Wednesday it will spend $750 billion on infrastructure through 2030, roughly 25% above earlier estimates, and unveiled its first named project, per TechCrunch. Project Camellia is a $20 billion, 1,400-acre data center campus northwest of Savannah, Georgia. The campus will draw at least 3.2 gigawatts from Georgia Power between 2028 and 2032. OpenAI committed to fund the full infrastructure and electric service costs of the new data center itself, rather than pass costs on to existing utility ratepayers. [TechCrunch](https://techcrunch.com/2026/07/22/openais-ai-spending-spree-has-ballooned-to-750b/)