California, not Trump, will decide how risky its AI startups are, Newsom says

California Gov. Gavin Newsom signed an executive order Monday directing the state to review any federal designation of a business as a supply-chain risk and make its own decision about whether to do business with that company. The order followed the Department of Defense's move last month to label San Francisco-based AI startup Anthropic a supply-chain risk, effectively barring it from certain military contracts. A judge recently issued a temporary injunction blocking that designation. Newsom's order also places guardrails on the use of artificial intelligence by state employees while encouraging accelerated adoption of the technology. It requires state agencies to develop contract standards addressing AI's potential to generate child sexual abuse material, violate civil liberties, or infringe on protections against unlawful discrimination and surveillance. Agencies must also update the State Digital Strategy to identify ways generative AI can improve government transparency and services, develop AI tools for public access to services, and issue guidance on watermarking AI-generated imagery and video. More than 20 state departments are working on a generative AI assistant for employees, and several agencies are testing AI to assist homeless people and businesses. Newsom's office said the Trump administration has rolled back AI protections, adding that California remains committed to ensuring AI solutions cannot be misused by bad actors. This is Newsom's second executive order on AI, following a 2023 order focused on generative AI.