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The Nvidia CEO says providers can cut off customers they do not want using their products. Officials and Anthropic allege some labs broke access rules.
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Nvidia CEO Jensen Huang says providers should treat model distillation as competition and manage unwanted use by controlling customer access, rather than treating the method itself as theft. The dispute has policy consequences: Treasury Secretary Scott Bessent has threatened sanctions, but has not announced them, and the conduct that would trigger penalties remains undefined.
Anthropic’s February disclosure called distillation widely used and legitimate, including for creating smaller versions of a lab’s own models.
Anthropic said the labs used proxy services and targeted prompts; the account and exchange totals are its findings, not independently established figures in the article.
Bessent’s threatened sanctions have not been announced; the unresolved policy question is whether penalties would target distillation itself or violations of access rules.
A training method has become a fight over what counts as fair competition in AI. In a CNBC interview Monday, Nvidia CEO Jensen Huang called model distillation “competition,” pushing back on Treasury Secretary Scott Bessent’s description of it as “theft.” U.S. officials and Anthropic have accused Chinese AI labs of violating access rules while using the technique.
Distillation means training one AI model on answers produced by another. It is not inherently illicit: in a February disclosure, Anthropic called it a widely used, legitimate way to build models, including smaller versions of a lab’s own systems. The company also warned that competitors could use it to acquire another lab’s capabilities illicitly.
In that disclosure, Anthropic alleged that DeepSeek, Moonshot and MiniMax generated more than 16 million exchanges with its Claude model through about 24,000 fraudulent accounts. It said the labs used proxy services to access Claude at scale while evading detection, and aimed repeated prompts at particular capabilities. Those figures and accusations are Anthropic’s findings.
Bessent raised the stakes in July, calling distillation “theft” and threatening sanctions against overseas companies using it to extract capabilities from U.S.-built models. Earlier this month, the Cybersecurity and Infrastructure Security Agency accused Chinese AI companies of industrial-scale campaigns that violated U.S. companies’ terms of use. Anthropic separately accused Alibaba and DeepSeek of illicit distillation; China rejected the claims.
Asked on CNBC whether distillation was “not robbery,” Huang replied, “That’s called competition.” Companies are allowed to test one another’s products, he argued. He said companies sometimes take apart Nvidia’s products to learn how they work. He would prefer they did not, but said competition makes products better.
Huang’s answer to unwanted use was to know your customers and disable the service. That places responsibility for controlling access with the provider. His remarks in the CNBC interview did not specifically address Anthropic’s allegations about fraudulent accounts.
Huang says companies may test competitors’ products and calls learning from them competition.
Bessent used the theft label while threatening sanctions over extracting capabilities from U.S. models.
Bessent has threatened sanctions, not announced them. Any such action would force a sharper question than whether distillation is good or bad: which conduct would trigger a penalty? Huang has defended testing rival products; the agency and Anthropic have alleged violations of access rules. His interview leaves that gap between the positions unresolved.
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