Bernie Sanders Wants to Ban Superintelligence. What It Means for Microsoft and Amazon

Senator Bernie Sanders and Representative Greg Casar unveiled legislation on September 3 aimed at permanently banning artificial superintelligence and temporarily halting advanced AI development until federal regulators establish safety rules. This proposal would also involve international agreements and penalties for non-compliance.

Companies like Microsoft and Amazon stand to be affected due to their involvement in developing frontier AI models, cloud computing, and their own AI products. Microsoft's potential advantage lies in its enterprise distribution through Azure, Copilot, and model partnerships, which can transform infrastructure investments into recurring software and cloud revenue.

However, a safety regulator might favor a compliant vendor with established government relationships. On the other hand, the bill's broad definition of advanced AI could delay releases, strain capacity, or increase compliance costs before regulations are finalized. Microsoft's shareholding dropped from 282 to 273 hedge funds by June 30, 2023.

Amazon's exposure to the bill is through AWS, Bedrock, Trainium chips, and its $18 billion investment in Anthropic. Its bull case is model choice and infrastructure efficiency, allowing customers to use multiple providers while AWS benefits from compute power. The bear case is the anticipated $220 billion of capital spending in 2026, which will take years to monetize.

A regulatory pause could extend this payback period or shift workloads abroad. Hedge funds held 369 shares of Amazon.com, Inc. at the end of Q2, up from 353 in Q1. Microsoft's short-interest settlement showed 68,544,953 shares sold short, equivalent to 0.92% of float, with a 2.05-day coverage ratio, indicating minimal short-term positioning ahead of the proposal.

The bill's final text and support remain uncertain, so investors should not consider it as enacted policy. The immediate impact is a heightened policy risk on frontier AI spending. The key is to monitor statutory definitions, regulator authority, international coordination, and the impact of compliance costs on smaller competitors versus cloud giants.

A regulator could impose clearer testing and incident reporting requirements, raising fixed costs but potentially enhancing customer trust. The financial significance of these regulations will only become clear if they alter deployment schedules, utilization, or product eligibility. While acknowledging Microsoft's potential as an investment, the report suggests other AI stocks may offer greater upside potential with less downside risk.

For those seeking an extremely undervalued AI stock that could benefit from Trump-era tariffs and the onshoring trend, a free report is available.