United States President Donald Trump is under increasing pressure to address the rising success of Chinese artificial intelligence (AI) models, which many companies prefer over more powerful but costlier US versions from firms like Anthropic and OpenAI.

The spotlight intensified with the release of Kimi K3 by Chinese company Moonshot. White House officials allege that Kimi K3 was developed by illicitly copying capabilities from Anthropic's leading model through a technique called distillation. While distillation is a common industry practice, US officials claim Chinese firms have used it at scale to unlawfully replicate proprietary American AI systems.

Michael Kratsios, director of the White House Office of Science and Technology Policy, condemned this practice on July 22, 2026, and suggested Moonshot circumvented US export restrictions on advanced AI chips from Nvidia to build its products. The Commerce Department's Bureau of Industry and Security has formally launched an investigation into Chinese firms like Moonshot regarding their use of these chips.

Treasury Secretary Scott Bessent has threatened sanctions against China, with reports indicating the US is considering bans or restrictions on foreign-made open-source AI models often created through distillation.

Sarah Heck, head of public policy at Anthropic, described illicit distillation as "IP theft and industrial espionage" and a "national challenge that creates serious national security risks for the US and democratic allies."

However, the Little Tech Association cautioned that "denying American startups access to models available abroad would stifle competition, entrench incumbents, and function as a tax on intelligence."

David Sacks, former White House chief on AI policy who still advises the president, urged calm, stating, "The Kimi panic needs to stop."

The debate also includes Nvidia CEO Jensen Huang, who supports the Chinese models, emphasizing that his company provides AI infrastructure for both open-source and US proprietary AI firms.

Lobbyists argue that open-model AI should be viewed as healthy competition rather than a security threat.

Sources