Prof G Markets · Tuesday, July 28, 2026
Chinese AI companies are facing accusations of using 'distillation' to build smaller, cheaper models by leveraging the outputs of U.S. AI models, potentially infringing on intellectual property. Distillation, while a common AI practice, becomes controversial when used at scale with unauthorized access to proprietary model outputs.
“One of the things that has caused a lot of controversy is this idea of distillation. And this is what Anthropic and OpenAI have accused many Chinese AI companies of doing, distilling their models, which has a relationship between being an open weight model as well.”
“So the way and scale that some of the Chinese companies have been accused of, uh, sort of leveraging American IP in this case is through, for example, building up a bunch of fraudulent accounts, getting the outputs from the American AI, um, models and then using that output to train their own models.”