Trump under pressure from all sides over Chinese AI surge

WASHINGTON – US President Donald Trump is under pressure to respond to the increasing success of Chinese artificial intelligence models that many companies prefer over 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.

The method is widely used across the industry, but US officials say Chinese companies have deployed it at scale to illicitly copy proprietary American systems.

Michael Kratsios, director of the White House Office of Science and Technology Policy, decried the practice on July 22 and suggested that Moonshot had circumvented US export curbs on powerful AI chips from Nvidia to build its products.

The Commerce Department’s Bureau of Industry and Security is formally investigating Chinese companies such as Moonshot over the use of these chips, a spokesperson told The Information.

Treasury Secretary Scott Bessent this week threatened sanctions against China, with reports that the US is weighing a ban or curbs on foreign-made open-source models, which are often built through distillation.

Earlier in 2026, Anthropic sent letters to US lawmakers warning about the practice, formally accusing 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 creates serious national security risks for the United States and democratic allies”, Sarah Heck, Anthropic’s head of public policy, said on social media platform X.

Open-source, or open-weight, models cost less and use source code that programmers can customise – something especially appreciated by start-ups 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.

Even if just floated as an idea, the start-up community has asked the White House to forgo any plan to block foreign-made open-source models, saying it would unfairly reward US AI giants, thwart competition and stick entrepreneurs with high AI prices.

“Lobbyists are urging Washington to treat open-model AI as a security threat. In fact, it is something more familiar: proper competition that should be welcomed,” wrote Bill Gurley, a former venture capitalist, in The Washington Post.

On July 22, a group of 179 start-ups 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 start-ups access to models available abroad would stifle competition, entrench incumbents and function as a tax on intelligence,” said the letter from the Little Tech Association.

‘Panic needs to stop’

Some critics of limiting open source models believe that OpenAI and Anthropic are trying to save themselves by eliminating the emergence of this rival technology.

The two AI giants are facing huge financial pressure ahead of expected initial public offerings in the coming months, with Wall Street taking a closer look than ever at their business performance before the expected public listings.

“The Kimi Panic needs to stop,” said David Sacks, the White House’s former chief on AI policy, who still has Trump’s ear.

“President Trump’s light-touch regulatory approach is working... As long as we don’t sabotage ourselves with unnecessary rules, the US will continue to win,” he said on X.

Weighing in on the debate firmly for the Chinese models was Nvidia chief executive Jensen Huang, whose company makes AI’s core infrastructure, whether for open-source companies or US-made proprietary ones.

US companies should “absolutely” be allowed to use Chinese AI models, he said to Axios.

“These Chinese models are excellent. Open-source models that are excellent should be used,” he said. AFP