US Warns China of AI Sanctions Over Intellectual Property Theft

The Trump administration is poised to investigate Chinese companies for allegedly "distilling" U.S. artificial intelligence models, with Treasury Secretary Scott Bessent warning of potential sanctions for intellectual property theft. Bessent told Fox Business that Washington will not tolerate such actions and has found indications of U.S. AI capabilities within Chinese systems.

The technique in question, "distillation," allows smaller AI models to learn and replicate the behavior of more advanced ones. U.S. companies, including Anthropic, have accused Chinese firms like DeepSeek, Moonshot AI, and MiniMax of illicitly using this method to copy their AI capabilities. This comes amid intense competition between the U.S. and China for AI leadership.

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If we see, especially, that foreign models are stealing from our big companies, we have the ability to sanction them for it.

Recently, Chinese companies have unveiled AI models that rival those from OpenAI and Anthropic in performance and cost-efficiency. Moonshot AI's Kimi K3, launched last Friday, reportedly surpasses some OpenAI and Anthropic models in specific industry benchmarks. The launch caused stock drops on Wall Street, particularly among semiconductor companies, due to concerns about Chinese models impacting sector margins.

While U.S. firms still lead in developing the most advanced AI, Chinese companies are rapidly closing the gap. Moonshot AI's Kimi K3, with 2.8 trillion parameters, is positioned by consultants as comparable to top-tier models from Anthropic and OpenAI, though not the absolute best. Despite competitive performance, Kimi K3 is not among the cheapest new-generation Chinese AI models, priced at $15 per million tokens generated.

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