Michael Kratsios accuses Chinese firm Moonshot AI of stealing American intellectual property through large-scale AI distillation.
Michael Kratsios, a White House adviser, stated that the Chinese firm Moonshot AI has engaged in "industrial-scale" distillation to develop its Kimi K3 model. Distillation is a process where a weaker AI model extracts answers and capabilities from a stronger, more advanced model. Kratsios noted that Moonshot AI specifically distilled capabilities from Anthropic's Fable AI, while also utilizing restricted Nvidia servers to train its technology. The administration is increasingly concerned that these techniques allow foreign rivals to bypass the massive costs of original research. Treasury Secretary Scott Bessent suggested that sanctions may be used against Chinese companies that cross the line into intellectual property theft. While tech giants like Nvidia and Microsoft urged policymakers to avoid premature restrictions on open-weight models, Anthropic argued that stopping illicit distillation is a matter of national security. The Chinese government maintains that its AI progress is the result of its own dedication and international cooperation.