U.S. Accuses DeepSeek, Alibaba and Other Chinese AI Firms of Large-Scale Distillation

The U.S. government has accused six Chinese AI firms of using large-scale distillation to copy the capabilities of American models, in a move that highlights the intensifying AI rivalry between the two nations.

The six Chinese firms under accusation are DeepSeek, Moonshot AI, Alibaba Group, MiniMax, StepFun and Z.ai. The U.S. National Security Agency, the Federal Bureau of Investigation and the Cybersecurity and Infrastructure Security Agency issued a joint statement on Tuesday to alert U.S. companies and organizations about the Chinese companies’ activities.

“While ‘distillation’ is recognized as a legitimate and useful technique in AI research, China-based AI companies are engaging in aggressive, malicious, and targeted distillation activities at an industrial scale that extract restricted proprietary functionalities and capabilities of U.S. frontier AI models,” the agencies said.

The agencies, for example, alleged that Moonshot, whose Kimi K3 model has become a global hit, has conducted a distillation campaign against U.S. frontier labs since at least mid-2025. They accused Moonshot of having distilled 17 American models including Anthropic’s Claude Fable 5, which came out in June. A Moonshot spokesperson declined to comment.

Distillation has become a sensitive and highly controversial topic due to the AI rivalry between the U.S. and China. As Chinese models have become more powerful, Trump administration officials have criticized Chinese AI firms for alleged distillation attacks. This year, Anthropic has accused several Chinese firms of engaging in large-scale distillation of Claude models.