US claims Chinese AI companies’ core AI strategy is distilling American models

Spooks and CISA point to ‘industrial-scale distillation’ by DeepSeek, Alibaba, and other Chinese players

Two US intelligence agencies and the nation’s cyber-defense org CISA have accused Chinese AI companies of running “aggressive, malicious, and targeted distillation activities at an industrial scale that extract restricted proprietary functionalities and capabilities of U.S. frontier AI models.”A Tuesday joint advisory from The National Security Agency (NSA), Federal Bureau of Investigation (FBI), and Cybersecurity and Infrastructure Security Agency (CISA), alleges that China’s government is “likely” aware of distillation campaigns conducted by DeepSeek, Moonshot AI, Alibaba, MiniMax, StepFun, and Z.AI. The agencies claim that distillation is “the core – not merely a supplement – of their AI development strategy.”Distillation is a process that sees a small model query a larger model to learn how it responds. Over time, the smaller model’s performance improves. Distillation can be a legitimate use of a model if, for example, the organization that creates a model wants to make a smaller version of it without needing to go through the lengthy and expensive process of training a new model.