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.

Trump declared that the United States does not need the Strait of Hormuz, one of the world's most strategically significant waterways for global oil transit. In the same statement, he noted that Venezuela is working with the U.S. to produce oil, pointing to an emerging area of energy cooperation between the two countries.

Key Statements at a Glance

The remarks touch on two distinct but related dimensions of U.S. energy and foreign policy. The following table summarizes the core assertions made:

U.S. Energy Independence and the Strait of Hormuz

The Strait of Hormuz is a narrow waterway between the Gulf of Oman and the Persian Gulf, through which a significant share of the world's oil supply is transported. Trump's assertion that the U.S. does not need this route underscores a position centered on domestic energy sufficiency, suggesting the country's reliance on oil passing through this chokepoint has diminished.

Venezuela and U.S. Oil Cooperation

Trump's statement regarding Venezuela marks a noteworthy development in the energy relationship between the two nations. According to the remarks, Venezuela is actively working with the U.S. on oil production, indicating a degree of bilateral engagement in the energy sector. No further details on the scope or terms of this cooperation were provided in the source statement.