That sounds like net benefit for the US. Foreign nationals come, the US sells them (overpriced) education, they do relatively low-paid but high-value PhD research, and then most of them stay and continue to contribute to US research endeavors and the economy. This is such an enviable position, and this administration wants to close the doors? This is the secret sauce. This is what has made america great.

As a thought experiment, imagine a variant of something like SD was used for music generation rather than images. It was trained on all music on spotify and it is marketed as a paid tool for producers and artists. If the model reproduces specific sounds from certain songs, e.g. the specific beat from a song, hook, or melody, it would seem pretty straightforward that the generated content was derivative, even though only a feature of it was precisely reproduced. I could be wrong but as far as i am aware you need to get permission to use samples. Even if the content is not published those sounds are being sold by the company as inspiration, and therefore that should violate copyright. The training data is paramount because if you trained the model on stuff you generated yourself or on stuff with appropriate CC license, the resulting work would not violate copyright, or you could at least argue independent creation.

In the feature space of images and art, SD is doing something very similar, so i can see the argument that it violates copyright even without reproducing the whole training data.

Overall, i think we will ultimately need to decide how we want these technologies used, what restrictions should be on the training data, etc, and then create new laws specifically for the new technology, rather than trying to shoehorn it into existing copyright law.