Can China just steal America's AI brain that's -2-

Still, even then, there may be limits to what legislation can accomplish. Nvidia's (NVDA) graphics processing units are heavily restricted in China, yet reportedly $1 billion of the company's AI chips were smuggled into the country last year. And the barrier for protecting software and API data is even lower than physical hardware, Lambert said.

That begs the question of how frontier models can differentiate themselves and, most importantly, monetize. "What is the actual value of these companies?" Caen said. He suggested that determining the AI leader of the future may not come down to a lab's proprietary training data, but rather the one whose model is best integrated into enterprise and user workflows.

"Distillation is sort of like fighting over who gets to fill the tank with whose gas - but the real battle is over who gets to be the engine," Caen said.

The value to enterprises and end users increasingly depends on the orchestration layer built on top of the model, such as the data sources and workflows the LLM can connect to. The actual models by themselves could end up becoming commodities, he added.

Lambert doesn't think that models face a pressing threat of commoditization, as that might be giving distillation too much credit. The top U.S. models are still noticeably better than Chinese ones despite the occurrence of distillation, and have access to much more resources, he said.

-Christine Ji -William Gavin

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02-28-26 0800ET