Silicon Valley Is Completely Divided Over Chinese AI

is brewing in Silicon Valley over the proliferation of Chinese-made artificial intelligence tools, particularly “open-weight” AI systems that, by some measures, can compete with or even outperform some of the best US models. My WIRED colleague Hugo Lowell has written about the Trump administration’s internal debate on how to handle these Chinese models. Among AI companies in the Valley, the issue is proving even more divisive.

A top concern in both DC and the Valley relates to distillation, in which a less capable AI model is trained on the outputs of a more powerful one. In June, Anthropic accused the Chinese tech giant Alibaba of illicitly stealing its IP through distillation attacks. Then, earlier this week, the White House said that it believes the Beijing-based Moonshot AI had developed its Kimi K3 model by distilling Anthropic’s Fable 5 model.

Another big concern is how quickly China’s models are appearing and spreading. An open-weight AI model has its core components made public, so that it can be fine-tuned to suit a user’s needs. But they don’t have the kinds of guardrails on which Anthropic has been building its reputation. Yasir Atalan, deputy director and data fellow at the Center for International and Strategic Studies, points out that the main benefit of open-weight AI models is their speed of diffusion. They can spread especially easily “through Hugging Face, GitHub, cloud providers, local deployments, and third-party inference platforms,” he writes. If you’re Anthropic, and you’ve built a cult around safety and charge for access to your big expensive proprietary models, you have every reason to want to regulate this.

But some Silicon Valley startups—not the trillion-dollar ones like OpenAI and Anthropic—really don’t want the US government to put restrictions on these AI models. On Wednesday a group of over 200 startups called the Little Tech Association sent a letter to Michael Kratsios, science adviser to President Donald Trump, and US Commerce Secretary Howard Lutnick lobbying against an outright ban of open-weight AI models. The group, which includes famed startup incubator YCombinator, has argued in favor of certain safeguards but says that denying Americans access to AI models abroad would weaken US startups and create a monopoly among the AI giants.

Bill Gurley, the legendary tech investor and longtime partner at Benchmark Capital, has publicly argued in favor of letting “the free market work.” In a lengthy blog that offers a nice little history of open-source software, Gurley writes that open-weight models avoid lock-in, encourage true academic research, and are critical for capital-constrained startups.

“Every AI startup, every solo developer, every two-person team building a product on top of AI infrastructure depends on having access to good models at affordable prices,” Gurley says.

Chamath Palihapitiya, one of the All-In podcast hosts, wrote on X that “tricking the US Government to protect frontier labs’ business model by using a China boogeyman is a mistake…It is protecting the equity of 5,000 people who are investors in OAI and Ant at the sale of everyone else. This would be a terribly stupid decision.” His cohost and fellow VC Jason Calacanis piled on. “Daddy Trump protect us!!!!” he wrote on X, with an alarming number of crying-laughing emoji.

This stance from some of Silicon Valley’s most ruthless capitalists might at first seem counterintuitive. Why let a foreign adversary’s technology flourish in the US? It’s as if the US is up just 1-0 in the AI World Cup, a slightly uncomfortable lead, and the crowd is chanting for the opposing team to get a free kick.

The reason, as always, is money. In a sense, open-weight models are the “move fast and break things” of the AI era, if the new motto tacked on something like “and use a scalpel to fix it.” Having access to open-source software allows startups to scale, scale, scale—and deal with the consequences down the road. Meanwhile, the AI labs and hyperscalers that make proprietary platforms, like OpenAI, Anthropic, Google, Microsoft, Meta, and XAI, stand to benefit greatly if their systems remain protected and dominant.

The bigger question that none of these companies seem to be asking is what best serves the 99 percent of us who don’t have their financial future fully staked on advancing AI. Anthropic CEO Dario Amodei has warned repeatedly that open-weight LLMs present an untenable security risk, because they can be downloaded by anyone and tuned to malicious ends. That argument might sound hard to dispute, except that the recent Hugging Face hack happened to show the opposite. After an OpenAI model escaped containment and infiltrated the open-source platform, “our own forensic work was blocked by the guardrails of the hosted models we first tried,” Hugging Face wrote on its blog. The company then turned to a Chinese open-weight model to help resolve the threat.

The US government has much to weigh as it decides how to handle Chinese open-weight models. Thank goodness this administration doesn’t seem to be at all financially motivated.

This is an edition of Steven Levy’s Backchannel newsletter. Read previous newsletters here.