US agencies warn China-based AI firms run industrial-scale model theft via knowledge distillation

CISA, NSA, and FBI issued a joint advisory detailing China-based AI companies using industrial-scale knowledge distillation to extract US AI model capabilities, shortcutting development. The advisory marks an escalation in US-China AI competition, shifting focus from hardware export controls to software/IP theft. Impact on US AI leadership and potential countermeasures remain uncertain.