US AI firms warn of distillation attacks; China threatens countermeasures

US frontier AI companies and government officials are raising alarms about distillation attacks, where rivals extract data from frontier models to train cheaper competing systems overseas. China's government said it would respond with "countermeasures" if the US tries to further constrain domestic Chinese AI models.

Why it matters: This is the latest flashpoint in US-China AI competition, following earlier reports on China's chip-smuggling workarounds and its narrowing model-capability gap. Distillation lets a rival catch up without matching compute spend, so how effectively this gets countered could determine how much lead US labs can actually keep.