The AI slowdown is coming

Jul 31, 2026 Welcome to Transformer, your weekly briefing of what matters in AI. If you’ve been forwarded this email, click here to subscribe and receive future editions. NEED TO KNOW Anthropic revealed that in internal testing Claude “gained unauthorized access to the real systems of three different organizations.” The Senate Commerce punted a markup on AI bills until after the summer recess. The White House AI framework is expected to be published by Sunday. But first… THE BIG STORY Like it or not, an AI slowdown looks imminent. The OpenAI-Hugging Face hack has catalyzed a vibe shift — one sure to be amplified by yesterday’s revelation that Anthropic’s models also hacked into other companies during internal tests, going unnoticed for months. Sam Altman said the hack by his models was “the first security incident that I have felt very viscerally.” He wasn’t the only one shaken up. This week, over a thousand employees of frontier AI companies, including some of the most senior executives at OpenAI, Anthropic and Google DeepMind, signed a statement warning that “there is a real risk that capability development rapidly accelerates beyond our ability to understand or control the resulting systems.” It asks the US government to “support an international effort to develop the technical and governance tools needed to deliberately pace the frontier of automated AI development.” Both OpenAI and Anthropic endorsed the letter, too. Congress is itching to act, albeit failing to make much progress. And even President Trump is talking about the need to balance beating China with keeping Americans safe. In other words: many of the people building frontier AI systems believe we might need a slowdown in the near future. And at this point, we’re more likely than not to get one. What will that look like? First, self-regulation: companies voluntarily holding back models because they don’t want to be held responsible for a catastrophe. We’ve already seen that with Claude Mythos and GPT-5.6-Cyber; as capabilities continue to advance, expect more of this. Given the recent incidents have concerned internal deployment, rather than public releases, we might also see companies slowing down development, too. Next will come concrete regulation: companies will not be allowed to release a model unless it’s safe. This is arguably a position we’re already in, thanks to the de-facto licensing regime created by last month’s executive order; a draft AI framework expected to be released this weekend will formalize it further. Over time, this will morph into controls on internal research and development too: requirements for proper sandboxing to begin with, expanding into requiring evidence-based guarantees that models won’t wreak havoc across the web if internally deployed. None of this need be planned as a coordinated slowdown or “pacing.” But that will nevertheless be the end result of a series of individual actions that each seem necessary at the time. Intelligence agencies are not going to allow models with advanced cyber — let alone bio — capabilities to be widely accessible. The White House will not let companies test models that might hack into third-parties with unknown repercussions. At each stage, some will fight against the slowdown. “We can’t lose the race to China” will be their main reason. But they will be increasingly ignored, as both the government and companies realize that with alignment and control unsolved, “winning the race” just means being the first to risk disaster. Across the Pacific, China will be facing the same incentives. As I’ve argued, the Chinese government will be forced to backtrack on its open weight commitments; tighter regulation will come soon after. The end result will be an uneasy détente. Both the US and China will effectively have a capability ceiling: AI models will be as good as they can be without posing significant risks. The ceiling will edge up as we make progress on alignment, control and societal resilience, but it will do so more slowly than capabilities advance today. At some point, the détente might formalize into a bilateral agreement; doing so will require the “technical and governance tools” to verify the kind of treaty the pacing letter calls for. Depending on your point of view, all this might seem hopelessly optimistic or naive. Perhaps it is. But as AI risks become all too real, so might once unthinkable policy responses. — Shakeel Hashim THIS WEEK ON TRANSFORMER Who should be responsible for OpenAI’s hack of Hugging Face? — Gabriel Weil argues AI companies need liability rules akin to keepers of wild animals Internal AI deployments have people worried. OpenAI’s escaping models show why. — Celia Ford explains why everyone was already so worried about internal deployments Child safety vs privacy: AI’s age verification dilemma — Veronica Irwin digs into the difficult tradeoff at the heart of attempts to protect kids from AI. THE DISCOURSE On Saturday, roon tweeted: “if we could coordinate a global capabilities slowdown today i would likely press that magic button” Geoffrey Irving responded: “Buttons that achieve partial slowdowns exist and are not magic.” “I have spent a lot of time talking to Demis, Sam, and Dario over the years … and they are all (1) very competitive, (2) want to personally be the one who gets there first, (3) think things are safest if they are the one that gets there first, (4) agree that risks destroying the world … it is still useful to point out that each lab has a unilateral slowdown button that slows down all the other labs.” Sam Altman said on a podcast: “This is the first security incident that I have felt very viscerally. I’ve been a little surprised that more people don’t feel it so viscerally.” “We may have to pace the rate of AI development to give ourselves enough time for society to harden around these new capability levels. And trying to figure out how we do that in a way that does not feel like regulatory capture for anyone and also does not feel like collusion among the frontier labs.” Rep. Bill Foster is listening: “When business leaders get together and ask to be regulated, Congress should pay attention.” Garrison Lovely argued that the “pacing” letter doesn’t go far enough: “[A]s I sat with what the industry was trying to do — render us all obsolete — how it was going about it, and what it would even mean to ‘align’ universal labor-replacing machines in a world ruled by despots and their imitators, it became clear that a pause button, while welcome, was a wholly inadequate response, whose primary appeal was in how unobjectionable it was.” Because the world isn’t strange enough, Nick Fuentes told Hunter Biden: “I think AI is really gonna be transformative … You know, I’m actually on the liberal side of this, with Anthropic … I’m really nervous about what’s going to happen, especially in the next four years, because they’re racing towards this artificial general intelligence.” POLICY The Senate Commerce Committee punted a markup on a broader AI framework until after the August recess. Punchbowl reported this was due to opposition from Anthropic and Sen. Maria Cantwell. The primary target of their opposition was a provision that would have had companies self-report the risks of their models and not have them release risk reports publicly. Cantwell said yesterday that “we needed to have regulation on [AI risks] — not self-certification — but some regime.” Sen. Amy Klobuchar, who’s been working with Sens. John Thune and Ted Cruz on the bill, said “we can’t just stand down and not have coordinated standards” on frontier models, and that “it can’t keep waiting for the next election.” Before the markup was called off, Senate Democrats planned amendments to resist piecemeal state AI preemptions. Despite the punt, some think a deal might be closer than expected. Next week’s Commerce markup will include the Kids Online Safety Act and the CHATBOT Act, however. Rep. Greg Casar called for a Congressional hearing on the OpenAI/Hugging Face hack. After the Anthropic hacks were revealed, Rep. Lori Trahan called for something similar. AI policy groups, meanwhile, urged Trump to investigate the OpenAI/Hugging Face hack. Rep. Jay Obernolte said he’s hoping for his FRONTIER Act (co-sponsored by Rep. Trahan) to get an Energy and Commerce Committee markup after the summer recess. “We’re certainly going to try and get it done this year,” he said. Sen. Mike Rounds proposed using the NDAA’s legislative model to piece together and pass a bipartisan AI policy package this year. A federal judge suggested the Pentagon’s case against Anthropic had gotten “worse” during a hearing on the AI company’s challenge to its supply-chain risk designation. The FCC banned imports of Chinese robots and power inverters, citing national security threats. Sen. Tom Cotton called for government agencies and contractors to be banned from using Chinese AI models. Reps. George Whitesides and Bob Latta and Sens. Adam Schiff and Jim Banks introduced legislation enabling AI companies to share threat intelligence to combat foreign distillation attacks and other national security threats. Rep. Frank Pallone demanded SpaceX records and a tour of xAI’s Memphis data centers, citing unpermitted gas turbines creating “a massive health risk.” Sen. Jon Husted reversed his pro-data center stance amid electoral pressure, now backing an end to tax breaks and pushing the Ratepayer Protection Act. Rep. Thomas Massie announced plans to sponsor a bill withholding federal funds from municipalities deploying Flock surveillance cameras. The EPA ruled that “islanded” power plants serving only data centers are exempt from the Clean Air Act’s Acid Rain Program. The Department of Homeland Security plans to expand AI use in FOIA processing amid a growing backlog, raising concerns from advocates about over-redaction and reduced transparency. Sens. Lisa Blunt Rochester and Roger Marshall introduced the RESULTS Act to modernize state education and workforce data systems using AI. xAI sued Minnesota over its law banning AI nudification technology, claiming it violates the First Amendment. Texas politicians from both parties called for AI and data center guardrails following the OpenAI-Hugging Face incident. China warned it would take “all necessary measures” if the US sanctioned Chinese AI firms over alleged misuse of American models. Xi Jinping urged the PLA to expand use of autonomous and AI technologies. Reuters reported that Chinese military researchers have distilled OpenAI and Anthropic models to train domestic defense AI systems. China’s national standards body announced plans to draft new standards on AI agent safety. Taiwan detained an Nvidia employee in an AI chip smuggling probe. The 21 APEC economies, including the US and China, released the “Chengdu statement” backing “open-source models and projects that employ strong security assurance through development and deployment.” INFLUENCE Nvidia, Microsoft, Meta, OpenAI and more than 22 other companies urged policymakers to avoid “premature restrictions” on open-weight AI models in an open letter. Notably, Anthropic did not sign. Dario Amodei clarified in an essay that Anthropic has never advocated for banning open-weights models, instead supporting chip export controls, anti-distillation measures and mandatory safety testing. Sam Altman visited Washington to preview the company’s forthcoming models and discuss the implications of open-weight models. Those he met included National Cyber Director Sean Cairncross, OSTP Director Michael Kratsios, Commerce Secretary Howard Lutnick, Treasury Secretary Scott Bessent, and members of Congress. Altman said he’s “not sure” whether OpenAI will release the model he showed senators, saying “that’s part of what we’re here to talk about.” Apple reportedly lobbied the Trump administration [truncated for AI cost control]