The Political and Regulatory Risks of AI and Crypto Policy in the U.S.: Assessing the Impact of Executive Overreach on Tech Sector Valuations and Investor Strategy
The U.S. regulatory landscape for artificial intelligence (AI) and cryptocurrency has undergone seismic shifts in 2024-2025, driven by executive actions that reflect starkly contrasting philosophies. These changes have directly influenced tech sector valuations, investor strategies, and market dynamics. This analysis examines the implications of regulatory overreach and deregulation, drawing on concrete data to quantify their impacts.
AI Regulation: From Biden's Caution to Trump's Deregulation
President Biden's 2023 Executive Order 14110 imposed a comprehensive framework for AI governance, emphasizing safety, privacy, and federal oversight. This order mandated rigorous testing and transparency for AI systems, particularly those with national security implications, and required collaboration with the National Institute of Standards and Technology (NIST) to develop safety standards [3]. While these measures aimed to mitigate risks, they also introduced compliance costs and slowed deployment, dampening investor enthusiasm.
The Trump administration's revocation of this order in January 2025 marked a dramatic pivot. Executive Order 14179 prioritized deregulation, reducing federal oversight and encouraging private-sector innovation [6]. This shift has accelerated AI development, with companies like NvidiaNVDA-- and MicrosoftMSFT-- benefiting from streamlined procurement processes and reduced compliance burdens. According to a report by Orrick, the AI Action Plan unveiled in July 2025 further removed regulatory barriers, modernized infrastructure for AI deployment, and emphasized ideological neutrality in federal systems [1].
The market response has been telling. The Information Technology sector's P/E ratio surged to 38.62 as of September 2025, far above its 5-year average of 30.43 [5]. This valuation reflects investor optimism about accelerated AI adoption, particularly in semiconductors and enterprise software. However, the lack of ethical safeguards under the new regime raises long-term risks, including potential backlash over AI-driven price collusion or privacy violations [5].
Crypto Policy: From Restriction to Strategic Embrace
The Biden administration's 2022 Treasury Framework for Digital Assets and Executive Order 14067 imposed restrictive policies on crypto, including a de facto ban on federal agencies using digital assets and stringent compliance requirements for exchanges [2]. These measures stifled institutional adoption, with crypto market capitalization peaking at $1.2 trillion in 2024 before retreating.
In contrast, Trump's January 2025 executive order, “Strengthening American Leadership in Digital Financial Technology,” reversed course entirely. It prohibited the development of a U.S. Central Bank Digital Currency (CBDC), promoted USD-backed stablecoins, and established the President's Working Group on Digital AssetDAAQ-- Markets to craft a unified regulatory framework [2]. The SEC's subsequent agenda under Chair Paul Atkins further streamlined rules for crypto trading, custody, and capital raising [4].
The results were immediate. By December 2024, the crypto market cap had surged to $3.71 trillion, driven by institutional inflows and corporate adoption [1]. MicroStrategy's rebrand to “Strategy” and its $45.8 billion BitcoinBTC-- holdings exemplified this trend [2]. Financial institutionsFISI-- like Bank of AmericaBAC-- began offering crypto custody services, and the SEC's rescission of SAB 121 removed a major barrier to institutional participation [3].
Investor Strategies: Navigating Regulatory Uncertainty
The regulatory pendulum swings between Biden's caution and Trump's deregulation have created a volatile environment for investors. In Q1-Q3 2025, institutional investment in crypto surged, with the Working Group's 100+ policy recommendations providing clarity [4]. However, the absence of long-term frameworks—particularly in AI—introduces risks. For instance, the Trump administration's emphasis on “common sense” governance lacks safeguards against AI bias or misinformation, which could trigger future regulatory pushback [6].
Investor strategies have adapted accordingly. Tech sector allocations have shifted toward AI infrastructure (e.g., semiconductors) and blockchain enablers (e.g., custody solutions). The Information Technology sector's trailing 12-month P/E ratio of 29.7x as of September 2025 reflects expectations of 19% annual earnings growth [5]. However, elevated valuations also heighten vulnerability to regulatory reversals or market corrections.
Conclusion: Balancing Innovation and Risk
The 2024-25 regulatory shifts underscore a critical tension: fostering innovation while mitigating systemic risks. For AI, the Trump administration's deregulation has boosted valuations but left ethical and security gaps. For crypto, the pivot to pro-innovation policies has unlocked institutional capital but lacks long-term guardrails. Investors must weigh these dynamics carefully, prioritizing companies with adaptable compliance frameworks and diversified exposure to both AI and crypto.
As the regulatory landscape continues to evolve, one thing is clear: executive overreach—or its absence—will remain a defining factor in tech sector valuations and investor strategy.
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