If the government can stay back far enough that more than one AI company can train their models, it will end up working like steel mills - barely enough profit

If the government can stay back far enough that more than one AI company can train their models, it will end up working like steel mills - barely enough profit to pay the massive cost of capital due to competition. If the government regulates the industry into a monopoly, all bets are off. Their investors are going to push hard for shutting the door behind them so watch out. The only question is - what tactic? I don't really know, but one trick I am aware of is "specifying to the vendor." In other words, the introduction of regulatory requirements that are at every step in the process a description of the most favored vendor's product. As the favored players add more features, potentially safety features, those features are required in new regulations, using very specific descriptions that more or less mandate that you reproduce the existing technology, to use a software engineer's term, bug-for-bug. If your product is better in some ways but worse in others, you might have a chance in the market - but to no avail, if the regulations demand exactly the advantages of the established suppliers.