The House of Representatives narrowly approved a $1.15 trillion National Defense Authorization Act (NDAA) in a 216-212 vote, securing billions for military modernization, weapons programs, and President Donald Trump’s Golden Dome missile defense initiative. The legislation, which passed on Wednesday, allocates significant resources for aircraft programs, submarine construction, and personnel benefits amid escalating military spending related to the war in Iran.

The bill authorizes $56 billion for aircraft programs, including next-generation fighter jets, B-21 Raider bombers, P-8 maritime patrol aircraft, F-35 fighter jets, and Chinook and Black Hawk helicopters. Additionally, it provides more than $60 billion to build and support a fourth Columbia-class ballistic missile submarine, two Virginia-class submarines, and two Arleigh Burke-class destroyers. Lawmakers also adopted an amendment by Rep. Andy Biggs that cuts the Pentagon’s budget by 0.5% if any part of the Defense Department fails an audit, directing savings toward reducing the federal deficit.

Key Funding Allocations

The measure passed with six Democrats supporting it and seven Republicans opposing it. It now heads to the Senate after being paired with the SAVE Act. The approval signals a multi-year revenue opportunity for major U.S. defense contractors, creating a sustained pipeline of spending for Lockheed Martin Corp, RTX Corp, The Boeing Co, and Northrop Grumman Corp.

War Funding Controversy

The passage follows heightened scrutiny over war costs, as the Pentagon raised its estimated cost of the U.S.-Israel war against Iran to $37.5 billion, up from $29 billion in May. Defense Secretary Pete Hegseth defended a request for nearly $70 billion in supplemental war funding before the Senate, warning that without it, the military would face critical shortfalls through September.

Sen. Rand Paul (R-Ky.) criticized Hegseth’s demand as “completely and utterly fiscally irresponsible,” arguing that America’s growing national debt poses a greater threat than Iran. Paul warned that currency devaluation is a bigger national security risk and criticized the conflict with Iran as unconstitutional, noting that Congress never authorized the war as required by the Constitution.

Treasury Secretary Scott Bessent warned that Chinese artificial intelligence companies could face sanctions and Entity List designations if they use "industrial-scale distillation attacks" that cross into intellectual property theft. Bessent stated on Wednesday that President Donald Trump’s administration supports open-source AI and the innovation it unlocks but clarified that "open source is not open season on American IP." He emphasized that when firms from the People's Republic of China conduct covert, industrial-scale distillation attacks that cross the line into IP theft, sanctions and Entity List designations will be on the table.

US Allegations Against Moonshot AI

White House science chief Michael Kratsios alleged that Moonshot AI used Anthropic’s Fable models to develop its Kimi K3 model through large-scale distillation. Kratsios claimed Moonshot AI built a sophisticated internal platform to conduct large-scale distillation against U.S. models, allowing them to quickly switch between multiple methods of access to avoid detection. He further alleged that Moonshot AI acquired or accessed NVIDIA Corp GB300-equipped servers in Thailand to train its AI models. Anthropic reportedly traced 3.4 million exchanges with its models to Moonshot AI, routed through hundreds of fake accounts.

Industry Reaction and Previous Accusations

NVIDIA Corp CEO Jensen Huang offered a contrasting perspective, stating that American companies should "absolutely" use Chinese AI models. "Distillation, learning from AI, learning from other sources of knowledge, is fundamental to intelligence," Huang told Axios. He argued there is "no scenario where China runs U.S. companies off the road" and suggested that cheap open models expand AI's audience, driving demand for chips and data centers.

Separately, Anthropic in June accused Alibaba Group Holding Ltd’s Qwen AI unit of conducting a large-scale "distillation" campaign to extract capabilities from its Claude models. The company alleged the effort relied on nearly 25,000 fraudulent accounts that generated more than 28.8 million interactions with Claude to help improve Chinese AI systems.