The White House has accused Chinese groups of undertaking industrial-scale theft of American AI intellectual property, escalating tensions in the technology race. Michael Kratsios, director of the White House Office of Science and Technology Policy, confirmed the US government has evidence of foreign entities, principally in China, deliberately distilling US frontier AI systems to gain competitive advantages without investing in original research.

The accusation follows concerns about Chinese AI company DeepSeek, which allegedly used distillation—training smaller models on outputs from larger ones—to build powerful products at lower cost. US firms including Anthropic and OpenAI argue this practice undermines their competitive edge created by export controls on advanced American chips, which limit China's access to cutting-edge hardware needed for developing AI systems from scratch.

The Chinese embassy in Washington dismissed the White House claims as "pure slander." Kratsios distinguished between legitimate distillation for creating lighter models and "industrial distillation" that undermines American R&D. The accusation reflects growing concerns about technology transfer and intellectual property theft in the increasingly competitive AI sector, where both nations are racing for technological supremacy.