U.S. President Donald Trump is under pressure to reply to the developing success of Chinese AI models that many companies opt to the more powerful, but pricier, U.S. Versions from Anthropic or OpenAI.
The problem came to the fore this week with the launch of Kimi K3 by Moonshot, which White House officials say was evolved by stealing the capabilities of Anthropic’s most effective model through a process known as distillation.
The approach is broadly used across the industry, but U.S. Officials say Chinese firms have deployed it at scale to illicitly copy proprietary American systems.
Michael Kratsios, director of the White House Office of Science and Technology Policy, on Wednesday decried the practice and suggested that Moonshot had also bypassed U.S. Export curbs on powerful AI chips from Nvidia to build its products.
The Commerce Department’s Bureau of Industry and Security is officially investigating Chinese firms like Moonshot over their use of these chips, a spokesperson told The Information.
Treasury Secretary Scott Bessent this week threatened sanctions against China, with reports that the U.S. Is likewise weighing a ban or curbs on foreign-made open-source models which can be often built via distillation.
Earlier this year, Anthropic sent letters to U.S. Lawmakers warning about the practice, officially blaming Chinese companies Moonshot, DeepSeek and MiniMax of industrial-scale distillation of its Claude models.
Illicit distillation “is IP theft and industrial espionage” and “a national challenge that form serious national security risks for US and democratic allies,” Sarah Heck, Anthropic’s head of public policy, stated on X.
Open-source, or open-weight, models cost less and use source code that programmers can customize—something mainly favored by startups and companies that do not need to be beholden to models from Anthropic, OpenAI or Google that cost money and must be taken as is.
Even though it has simplest been floated as an idea, the startup community has asked the White House to forgo any plan to block foreign-made open-source models, announcing it would unfairly reward the U.S. AI giants, thwart competition and stick entrepreneurs with high prices for AI.
“Lobbyists are urging Washington to deal with open-model AI as a safety threat. In fact, it’s something more familiar: proper competition that should be welcomed,” wrote Bill Gurley, a former project capitalist, in The Washington Post.
On Wednesday, a group of 179 startups wrote a letter to the Trump administration urging it to think twice about any outright ban or strict curbs on foreign-made models.
“Denying American startups access to models available abroad could stifle competition, entrench incumbents and function as a tax on intelligence,” the letter from the Little Tech Association stated.
‘Panic needs to prevent’
Some critics of restricting open-source models believe that OpenAI and Anthropic are trying to save themselves the aid of removing the emergence of this rival technology.
The two AI giants are going through huge financial pressure ahead of anticipated IPOs in coming months, with Wall Street taking a much closer look than ever at their business performance earlier than their predicted public listings.
“The Kimi panic needs to prevent,” stated David Sacks, the White House’s former chief on AI policy, who still has the president’s ear.
“President Trump’s light-touch regulatory method is working… As long as we do not sabotage ourselves with unnecessary guidelines, the U.S. Will persist to win,” he said on X.
Weighing in firmly for the Chinese models was Jensen Huang, the CEO of Nvidia, whose company makes AI’s core infrastructure, whether for open-source corporations or U.S.-made proprietary ones.
American companies should “definitely” be allowed to use Chinese AI models, he told Axios.
“These Chinese models are excellent. Open-source models that are excellent should be used,” he stated.
