US AI Firms Face Growing Competition from Chinese Models

Chinese startups DeepSeek and Z.ai have introduced AI models that industry observers say match or exceed the performance of U.S. “big-lab” offerings, particularly in coding assistance and cybersecurity tasks. DeepSeek’s earlier release sparked a sharp sell-off in U.S. tech stocks, and Z.ai’s GLM-5.2, launched last month, is being touted as a low-cost alternative with comparable capabilities.

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Anthropic, a U.S. AI lab, has alleged that Chinese firms—including DeepSeek, Moonshot, MiniMax, and Alibaba—are employing “distillation” to harvest data from its models at scale. Distillation involves training a smaller “student” model on the outputs of a larger “teacher” model, a practice common in the industry. Anthropic’s letter to U.S. senators claims the technique is being used illicitly to replicate frontier U.S. technology.

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Marc Andreessen, a prominent Silicon Valley venture capitalist, highlighted the significance of GLM-5.2 in a public tweet. Anthropic’s formal complaint to senators underscores growing concern among U.S. firms. Some analysts suggest that, absent clear legal rulings, American companies may need to rely on internal safeguards. Policy options discussed include restricting China’s access to advanced U.S. AI chips or limiting U.S. users’ ability to access Chinese models, echoing prior actions on TikTok and Chinese electric vehicles.

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U.S. companies criticize the alleged distillation attacks as a “convenient distraction” from scrutiny over the high cost of their coding products. Several experts argue that a crackdown on distillation would have limited impact, noting that building a model as advanced as GLM-5.2 likely requires more than data-harvesting alone. The debate reflects broader anxiety about maintaining a technological edge in a rapidly globalizing AI market.

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• “AI insiders are saying GLM-5.2 is the first Chinese AI model to match and often beat the American big lab public AI models with no compromises.” — Marc Andreessen, venture capitalist

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• “These distillation attacks are carried out illicitly, systematically and at industrial scale to harvest US AI capabilities across frontier labs and repackage them as their own,” — Anthropic, letter to U.S. senators

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