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U.S. officials accuse China's Moonshot of stealing from Anthropic's Fable in Kimi K3 production

U.S. officials accuse China’s Moonshot of stealing from Anthropic’s Fable in Kimi K3 production

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A senior White House technology official on Wednesday accused Chinese startup Moonshot AI of covertly copying Anthropic’s Fable model to build its new Kimi K3 AI model, escalating a US-China conflict over AI in general just as Moonshot prepares to release the model to the public.

“Undermining American research is unacceptable”

Michael Kratsios, who directs the White House Office of Science and Technology Policy, laid out the claim in a post on X. He stated that his office had information that Moonshot ran its copying through a purpose-built internal system, while rotating access routes repeatedly to stay hidden as it pulled from US models.

Kratsios also said that the operation leaned on NVIDIA GB300 servers stationed in Thailand, which are Nvidia chips ranking among the chipmaker’s most powerful, and that US export rules bar from reaching China.

“Large-scale, covert industrial distillation aimed at stealing proprietary U.S. technology and undermining American research is unacceptable,” Kratsios wrote in the post.

Distillation: legal until it isn’t

The technique alleged to have been employed by Moonshot in the development of Kimi K3 is known as distillation. Distillation involves feeding the outputs of a stronger model to a weaker one, while training the weaker model to imitate the stronger one.

If done publicly and at a small scale, the practice is legal and common across the industry. However, the covert, industrial scale is widely objected to, and this is what Kratsios has accused Moonshot of doing. Kratsios says this is basically theft, and not routine engineering.

Wednesday’s accusations build on findings Anthropic published earlier in the year. In a February report, the company said it tracked more than 3.4 million Claude conversations back to Moonshot, routed through hundreds of fabricated accounts. Some of the account records lined up with the public profiles of Moonshot’s own senior staff, Anthropic stated.

The campaign, according to the company, went after Claude’s strengths in reasoning, coding, and vision.

Moonshot Kimi K3 model going public July 27

Moonshot put Kimi K3 out on July 16. At 2.8 trillion parameters, it is the largest open-weight model released to date, and it got so much interest that the company suspended new Kimi sign-ups within only two days.

The full model weights are due to go public by July 27, and Anthropic has said that this happening is a risk. The U.S. AI company argues that models built by copying drop the safety guardrails of the original model, and that once weights become open, they can travel beyond anyone’s control.

In January 2025, AI Czar David Sacks said DeepSeek had copied OpenAI’s models, an allegation DeepSeek outrightly rejected. Beijing also dismissed Anthropic’s February findings as groundless. Moonshot has said nothing publicly and Kratsios did not name any possible penalties.

The dispute also comes as the two governments prepare for AI talks in September. The US still outspends China on AI by almost 23 to one, yet Chinese labs keep closing the gap between U.S and Chinese AI models.

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Trump admin says China is raiding American AI labs to speed its own rise

Trump admin says China is raiding American AI labs to speed its own rise

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The Trump administration says China is trying to raid American AI labs to move faster. A Financial Times report on Thursday said the White House accused China of carrying out industrial-scale theft of US AI intellectual property and warned it would crack down.

The report cited a memo by Michael Kratsios, director of the White House Office of Science and Technology Policy.

Kratsios wrote that the US government has information showing foreign entities based in China are engaged in deliberate, industrial-scale campaigns to distill US frontier AI systems.

He said the operations are using tens of thousands of proxy accounts to avoid detection and jailbreaking methods to expose proprietary information. He also said Washington will alert American AI companies to unauthorized attempts at distillation and will consider steps to hold the actors accountable.

White House accuses China of stripping US AI systems while H200 chip sales remain stalled

The fight over stolen AI work is unfolding beside another dispute over advanced chips. Nvidia’s H200 chips are in heavy demand, and supply for the Chinese tech sector had been expected, but US officials say those chips still have not been sold to Chinese companies.

Commerce Secretary Howard Lutnick said Nvidia’s artificial intelligence chips have not yet been sent to Chinese firms, citing difficulties obtaining permission from the Chinese government.

The Trump administration formally approved China-bound sales of H200 chips in January, though with conditions. That decision stirred concern among China hawks in Washington, who fear Beijing could use the technology to strengthen its military.

Even so, shipments have been blocked by disagreements over sale terms in both the United States and China. Asked at a Senate hearing about the delayed sales, Howard said:

“The Chinese central government has not let them, as of yet, buy the chips, because they’re trying to keep their investment focused on their own domestic industry.”

Howard added, “We have not sold them chips as of yet.” The continued delay is likely to please US hardliners who reject the administration’s argument that such sales could discourage Chinese rivals, including heavily sanctioned Huawei, from pushing harder to catch up with American AI chip designers.

But Howard also appeared to step back from a prior pledge to restore in November a rule that would restrict US tech exports to Chinese companies.

China offers massive embodied AI pay packages as export curbs and trade talks stay tangled

The affiliates rule was delayed for one year last November as part of a trade negotiation with China. Howard said, “I agree that the affiliates rule is a smart thing for the United States of America to consider, but it is part of the balance of that full trade agreement.”

He also said the US trade relationship with China is led by President Trump, Treasury Secretary Scott Bessent, and US Trade Representative Jamieson Greer. Howard added, “I focus on the rest of the world.”

China’s embodied AI sector is in a fierce talent war. Some companies are failing to attract qualified workers even after offering CNY1 million (about $138,000) a year. Job listings show entry-level algorithm engineers in embodied intelligence can earn around CNY30,000 a month, or $4,140. 

Expert-level engineers are offered about CNY50,000 per month, while world-class engineers can get around CNY60,000. Other roles in demand include motion-control algorithm engineers and embedded software engineers, and most technical jobs require at least a master’s degree.

The pay rises. Ubtech Robotics, the world’s first humanoid robot maker to go public, launched a search this month for a chief scientist focused on humanoid robots and embodied intelligence.

The annual pay range is CNY15 million to CNY124 million, or about $2.2 million to $18 million. Last year, Volcano Engine, the cloud unit of ByteDance, began hiring a senior expert in algorithm manipulation for embodied robotics research, with a monthly pay of CNY95,000 to CNY120,000, or about $13,110 to $16,560.

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