US weighs curbs on Chinese AI models amid IP theft

What happened

US President Donald Trump is under pressure to respond to the increasing success of Chinese AI models that many companies prefer to the more powerful, but pricier, US versions from Anthropic or OpenAI. The issue came to the fore this week with the release of Kimi K3 by Moonshot, which White House officials say was developed by stealing the capabilities of Anthropic's most powerful model through a process called distillation.

Why it matters

The method is widely used across the industry, but US officials say Chinese firms have deployed it at scale to illicitly copy proprietary American systems. The Commerce Department's Bureau of Industry and Security is formally 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 the US is also weighing a ban or curbs on foreign-made open source models that are often built through distillation. Earlier this year Anthropic sent letters to US lawmakers warning about the practice, formally accusing Chinese firms Moonshot, DeepSeek and MiniMax of industrial-scale distillation of its Claude models.

Open source, or open-weight, models cost less and use source code that programmers can customize -- something that is especially appreciated by startups and companies that do not want to be beholden to models from Anthropic, OpenAI or Google that cost money and must be taken as is. "Lobbyists are urging Washington to treat open-model AI as a security threat.

What to watch

On Wednesday, a group of 179 startups wrote a letter to the Trump administration urging it to think twice against any outright ban or strict curbs on foreign-made models. "Denying American startups access to models available abroad would stifle competition, entrench incumbents, and function as a tax on intelligence," the letter from the Little Tech Association said.

"The Kimi Panic needs to stop," said David Sacks, the White House's former chief on AI policy, who still has the president's ear. "These Chinese models are excellent. Open source models that are excellent should be used," he said.