After DeepSeek V4 launch, US accuses Chinese AI labs of using ‘unauthorized distillation’ to clone Western tech

The United States has initiated a global diplomatic push alleging intellectual property theft by Chinese AI companies, according to a diplomatic cable seen by Reuters. The warning arrives shortly after Chinese AI startup DeepSeek made a grand comeback in the AI arena as it launched its highly anticipated V4 model, which is adapted for Huawei chip technology and is claimed to be on par with Gemini 3.1 Pro and GPT-5.4 on various tasks.

US warns about Chinese AI models:

According to the Reuters report, the cable sent to US diplomatic posts globally on Friday asked officials to speak to their foreign counterparts about “concerns over adversaries’ use and distillation of US AI models.”

“A separate demarche request and message has been sent to Beijing for raising with China,” the document reportedly notes.

It also explicitly names DeepSeek, alongside other Chinese AI firms Moonshot AI and MiniMax, in connection with these unauthorized campaigns.

Notably, distillation is a technique where a smaller AI model is trained to mimic the outputs and behaviour of a larger, more advanced model to cut development costs.

Reuters reports that the White House had made similar allegations earlier this week, although the cable itself had not been previously disclosed.

The State Department warned that while these distilled models appear to perform comparably on select benchmarks at a fraction of the cost, they do not replicate the full performance of the original systems.

“AI models developed from surreptitious, unauthorized distillation campaigns enable foreign actors to release products that appear to perform comparably on select benchmarks at a fraction of the cost but do not replicate the full performance of the original system,” the cable reportedly read.

It noted that the purpose of the cable was to “warn of the risks of utilizing AI models distilled from U.S. proprietary AI models, and lay the groundwork for potential follow-up and outreach by the U.S. government.”

China’s response to allegations:

The Chinese Embassy in Washington dismissed the accusations, calling them “groundless” and describing them as deliberate attacks on the country’s AI progress.

“The allegations that Chinese entities are stealing American AI intellectual property are groundless and are deliberate attacks on China’s development and progress in the AI industry,” the Chinese embassy in Washington told Reuters.

DeepSeek did not respond to the latest controversy, but the Chinese AI startup has previously stated that its V3 model uses naturally occurring data collected through web crawling, rather than intentionally using synthetic data generated by OpenAI.

The cable notes that a separate demarche has been sent to Beijing to raise the issue directly with the Chinese government. These White House-backed accusations emerge just weeks before U.S. President Donald Trump is scheduled to visit Chinese President Xi Jinping in Beijing.