US claims Chinese AI firms are carrying out ‘industrial-scale’ theft of trade secrets

The United States has accused Chinese artificial intelligence firms of engaging in "industrial-scale" theft of trade secrets, primarily through a method known as "distillation." This technique involves training smaller, less expensive AI models using the outputs and proprietary functionalities of more advanced American-made AI systems. US cyber and law enforcement officials, including the National Security Agency, the Cybersecurity and Infrastructure Security Agency, and the FBI, have identified companies such as DeepSeek, Moonshot AI, Alibaba, MiniMax, and StepFun as being involved in these "aggressive, malicious, and targeted" activities, noting that these actions are likely undertaken with the awareness of the Chinese government.

These allegations underscore significant national security concerns, with US officials warning that such intellectual property theft threatens American technological leadership in the global AI race. The White House has outlined measures to counter these threats, including enhanced intelligence sharing with US AI firms and increased industry coordination, while also considering potential sanctions and restrictions on implicated Chinese companies. These accusations frequently surface ahead of diplomatic meetings between US and Chinese leaders, intensifying ongoing tensions over technology and intellectual property.

China has consistently denied these claims, with the Chinese embassy in Washington asserting that the allegations are baseless and reaffirming Beijing's commitment to intellectual property protection. However, the US maintains that large-scale technology theft from American companies has been a persistent issue for over two decades, resulting in substantial estimated annual losses.