Source: The Register: Biting the hand that feeds
US intelligence officials say Chinese companies like DeepSeek and Alibaba are systematically extracting knowledge from American AI models through distillation—a technique that uses smaller datasets and computational resources to replicate a larger model's capabilities. If true at scale, distillation collapses the technical and financial moat that American labs (OpenAI, Anthropic, Google) have built. China could field competitive models without matching US R&D spending or access to training data, while circumventing export controls designed to slow their capabilities. The allegation is driving regulatory pressure on US AI companies to restrict API access and tighten model licensing, effectively converting the commercial AI supply chain into a geopolitical chokepoint.