TL;DR:

• White House Office of Science and Technology Policy director Michael Kratsios has accused Chinese entities of running “industrial-scale campaigns” to distil US frontier AI systems, using proxy accounts and jailbreaking techniques.
• The memo, first reported by the Financial Times, lands weeks before President Trump’s visit to Beijing for a summit with President Xi Jinping and risks unwinding a detente reached last October.
• It also raises doubts over whether Nvidia’s powerful AI chips will in fact ship to China, with Commerce Secretary Howard Lutnick confirming on Wednesday that no shipments had yet gone through despite January’s green light.

Michael Kratsios, director of the White House Office of Science and Technology Policy, has circulated a memo accusing Chinese entities of industrial-scale theft of US AI intellectual property, in a move that escalates the tech war between the two superpowers days before a scheduled Trump-Xi summit.

What the memo alleges

Kratsios wrote that foreign entities “principally based in China” are “engaged in deliberate, industrial-scale campaigns to distil US frontier AI systems”, using “tens of thousands of proxy accounts to evade detection” and jailbreaking techniques to expose proprietary information. Distillation is the process of training smaller AI models on the outputs of larger ones, and is a frequent shortcut for labs trying to approach frontier capability without matching frontier training budgets. Anthropic and OpenAI have both publicly accused Chinese startup DeepSeek of distilling their models; DeepSeek launched a Huawei-tuned V4 model preview the day after the Kratsios memo surfaced.

The Chinese Embassy in Washington called the accusations “baseless” and said Beijing “attaches great importance to the protection of intellectual property rights”. China’s foreign ministry urged Washington to “abandon biases” and said more, not less, scientific exchange was needed. The memo, addressed to US government agencies, says the administration will share information with American AI companies about distillation campaigns and “explore a range of measures to hold foreign actors accountable”.

The chip export question

The memo’s immediate commercial question is Nvidia. The Trump administration approved sales of Nvidia’s advanced AI chips to China in January with conditions attached, but Commerce Secretary Howard Lutnick confirmed on Wednesday that no shipments had actually gone through. That gap between policy and practice was already raising doubts among investors; the Kratsios memo will harden them. Nvidia’s ability to sell into China, and by extension the pricing and supply dynamics of frontier AI compute everywhere else, now turns on whether the summit holds or the detente unravels.

Looking Forward

For UK firms partnering with US labs or buying Nvidia-backed compute, the memo is a signal to expect tighter US export controls and more cautious information-sharing from American providers. Chinese distillation concerns will also feed into UK AI Security Institute evaluation priorities, which already spotlighted distillation-style risks in Anthropic’s Claude Mythos testing. The summit, scheduled for next month, now arrives with a far sharper confrontation backdrop than Washington and Beijing had planned.