Arthur Dong, a professor at Georgetown's McDonough School of Business, noted that AT&T derives a substantial part of its business from the U.S. federal government. "This has been a part of AT&T's domain for over a century. As such, if security concerns are voiced by the federal government, AT&T will most certainly obey," he said.
Dong said Huawei may turn to Verizon, Sprint or T-Mobile, the other big players in the U.S. mobile phone market, and see if they are interested in partnering.
"Bear in mind, many of the same concerns of AT&T may also be present in their discussions with the other major U.S. carriers," he said.
The Huawei case is likely to escalate the tension on the U.S. China trade and investment front.
Last week, the Committee on Foreign Investment in the United States, or CFIUS, blocked China's Ant Financial, also a private company, in its $1.2 billion acquisition of U.S. money transfer company MoneyGram International Inc, also citing national security concern.
U.S. lawmakers also have introduced a bill, known as the Foreign Investment Risk Review Modernization Act of 2017, in a bid to expand the power of CFIUS, targeted primarily at Chinese investment.
"We appear embarked on a new consensus that any hightech investment by China is not in the U.S. interest," said Douglas Paal, vice-president for studies and director of the Asia program at the Carnegie Endowment for International Peace.
Paal said the U.S. needs to be careful, in safeguarding what needs to be protected but not to close doors unwittingly to an opportunity to cooperate with Chinese technology front-runners.
In its annual report to Congress published last September, CFIUS said Chinese deals made up 29 percent of the 143 transactions it reviewed in 2015, the highest number among all nations.
On Sept 13, U.S. President Donald Trump issued an executive order blocking the buying of Lattice Semiconductor Corp by private equity firm Canyon Bridge Capital LLC, which is said to be backed by a Chinese state-owned asset manager.
The case marked the fourth time in 30 years that a U.S. president has blocked a transaction out of security concerns. All four cases have involved Chinese investors.
"There is no question in my mind that the decade-long, U.S. China high technology trade war is heating up," said Dan Ikenson, director of Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute.
"Huawei has long been held accountable for all of the perceived transgressions of the Chinese government in the realm of intellectual property and technology transfer policies," he said.
Ikenson said although any evidence of Huawei as a "bad actor" in the cyber sphere has never been made public in the U.S., there is a standing presumption in the national security community that is difficult to overcome.
"That, in my opinion, leaves plenty of scope for protectionism to masquerade as national security imperatives," he said, adding that "we must find a way to reach an understanding or else things will get much worse".
Wayne Morrison, a specialist in Asian trade and finance at the Congressional Research Service, said that efforts by Chinese firms that are owned, controlled or favored by the Chinese government will generally face tougher challenges doing business in the U.S. because of the uncertainty over whether investments and business deals are being made for market-based reasons or are being driven by Beijing.
"Cybersecurity concerns in both China and the United States appear to be a growing challenge in bilateral trade of high technology and communications products," he said.
