Chinese AI Allegations and OpenAI's Model Control Issues Explored

Washington DC, United States Jul 24, 2026 ALN: This week on Uncanny Valley, our hosts break down the White House’s accusation that Chinese-owned Moonshot AI distilled Anthropic's Fable 5 to build their much talked about Kimi K3 model. The team discusses whether this is a repeat of the DeepSeek moment and what it means for the AI race between the US and China. They also get into how the US Army—and plenty of Silicon Valley companies—are having to cut back AI usage after burning through their tokens. Plus, we discuss why you should check if you have an alarm that could make your car easier to hack, and how OpenAI briefly lost control of two AI models during a security test.

Articles mentioned in this episode:

• The White House Is Trying to Figure Out What to Do About Chinese AI
• OpenAI Models Escaped Containment and Hacked Hugging Face
• A Device Hidden in Cars Across the US Leaves Them Vulnerable to Hacking and Paralysis. Patch It Now
• System Update Newsletter: The Best of

You can follow Brian Barrett on Bluesky at , Zoë Schiffer on Bluesky at , and Leah Feiger on Bluesky at . Write to us at [email protected].

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Transcript

Note: This is an automated transcript, which may contain errors.

Zoë Schiffer: Welcome to 's Uncanny Valley. I'm Zoë Schiffer, contributing editor.

Brian Barrett: I'm Brian Barrett, executive editor.

Leah Feiger: And I'm Leah Feiger, director of politics and science.

Zoë Schiffer: Today on the show, we're taking a look at how Chinese AI has been leveling up in a major way. The latest model released by Moonshot AI, one of the most well-known labs in China, has been drawing worldwide attention this past week because of the model's enormous capabilities. On Wednesday, White House director, Michael Kratsios, accused Moonshot of illegally distilling Anthropic's Fable 5 model to build their own. We'll discuss whether we might be seeing another DeepSeek moment and what the AI race between the US and China actually means for users.

Leah Feiger: We'll also get into how the US Army has been burning through their AI usage tokens and now find themselves in a position where they need to limit use. They're far from alone in having to pare back, though. Companies like Meta and Uber are already rethinking their AI usage as well because surprise, surprise, it's really expensive to use all these models.

Brian Barrett: Who would have thought? Also, on the docket for today, your car could have a hidden device that makes it more vulnerable to hacking. We're going to talk you through how to identify it and why some dealerships added it in the first place. And later in the show, how OpenAI lost control of two of its AI models during a recent security test.

Zoë Schiffer: So this past Friday, the Chinese AI lab, Moonshot AI, released their latest model called Kimi K3. And this news made major waves first because the model is super capable. It goes toe-to-toe with the leading frontier models from OpenAI and Anthropic. And then today, White House director, Michael Kratsios, like we said at the top, basically accused Moonshot AI of distilling Anthropic's models to build their own. So now a major fight is breaking out. And this isn't the first time that Anthropic has accused a Chinese lab of distilling its models. I'm curious, Brian, Leah, what you think just right at the top.

Leah Feiger: So 's Hugo Lowell, the author of our Inner Loop politics newsletter has a piece that just came out this morning all about this basically, entirely about how the Trump administration is really, really split over how to handle Chinese AI. And you have all of these competing forces, you have the Commerce Department and Howard Lutnick that are saying, "Look, this isn't as scary as you think it is. We can figure some ways out of it." And then you actually also have people that are like, "No, no, no, we have to create an executive order. We have to stop them from stealing American AI. What do we do?"

Zoë Schiffer: The Commerce Department's main tool to try and combat this so far has been export controls. And we're seeing some people say like, "Oh, this is proof that export controls are failing." But if Chinese labs are in fact just stealing proprietary information from AI companies in the US, that's not necessarily a failure of export controls.

Leah Feiger: But it's also nothing that an executive order could stop. I'm sorry, but executive orders from the US do not apply to China. They don't. They can be strongly worded memos with declarative intent, but no one's getting in trouble there.

Brian Barrett: I want to back this up a little bit, too, because I think we haven't mentioned yet that what makes Kimi K3 especially interesting I think in this context is that it's an open-weight AI system, which means it's not unlike the proprietary systems that are coming out of Anthropic, and OpenAI, and other US-based AI giants. China has adopted this more open model ... A lot of Chinese companies have adopted this more open model where anyone can use these systems, anyone can tinker with them. It is a existential threat in some ways to companies that are saying, "Hey, look, we're going to charge you a ton of money to use ChatGPT or Claude." Here comes Moonshot DeepSeek before saying, "Or you could just use this for free," and it's just as good almost.

Zoë Schiffer: Right. And I think the theory behind this, there's a couple different ideas about why China is doing this. One is that it doesn't have as much access to compute. So this is the export controls theory. It's like because they don't have enough computers, they need to release open-source models because that helps build their reputation, and it extends their influence.

Brian Barrett: Which is interesting, this is the path that Meta had been pursuing for a while. Meta's Llama model was like they were the big US company going in on open-weight AI as a way to undercut the competition. They abandoned that, and they spent billions and billions of dollars putting together their superintelligence lab, which has not really amounted to much yet.

Zoë Schiffer: Not yet.

Brian Barrett: The US has really ceded the field to China in a lot of ways. I'm not aware of a major open-weight project going on in the US at all.

Leah Feiger: No, I think that the US has definitely gone in a different direction almost entirely. I mean, the reason that open-weight enthusiasts will say that it's better is in the US, every frontier lab has to basically recreate the same innovations from the ground up. They have to do very similar training runs. They can't see some cool technical trick that another lab has done and copy it to keep building on each other's success. They really are in direct competition. Whereas if you're all open-source open weight, as a country, you can advance perhaps quicker and hopefully a little cheaper because you're seeing what other labs are doing and just building on that pretty rapidly.

Leah Feiger: I wonder how scared some of the US's AI labs are. I mean, Anthropic quite literally just increased fees for Fable 5. This isn't something that they're like, "Oh, and we're going to go free now, too, you guys. We got to compete." That's not what's happening.

Zoë Schiffer: No, no, no. I think it only entrenches the US further in the proprietary, the need to keep these secrets secret essentially.

Brian Barrett: And especially as they're all barreling towards their own IPOs and they're going to have to start showing revenue and start showing up, if not, profit right away a clear path to profit, which I don't know that they necessarily have yet. And so any competitor that undercuts them like this is going to make that even trickier. I don't think there's any ... I think in the near term, they're fine. They're still going to be taking a billions of dollars. The IPOs are going to go fine. But it is a question of, especially as companies are realizing how expensive using AI is, and as we're in the era of token maxing, companies are understandably going to be looking for alternatives, and we're going to reach an inflection point where eventually we have to figure out, is AI just a commodity? Is it a commoditized product that you can get from anywhere? Or do you need the custom like, no, I really need Anthropic for some reason? No, I really need OpenAI for some reason. And I think that's still an open question.

Zoë Schiffer: I thought Dean Ball, who was previously a AI adviser for the White House and now is an executive at OpenAI, made an interesting point. I'm curious what you guys think about it, but basically, he said that one reason that China has taken the open approach is that they're just not as AGI-pilled as people in the United States and certainly the US government. I think the phrase he used was China and the CCP are pretty Yann LeCun-y when it comes to AGI, which is like Yann LeCun, a very famous AI scientist, previously a high-up executive at Meta. And he has been on the record a lot basically saying that all of the hype surrounding AGI and what it can do is it's just that. It's hype. It's over-hyped. And in fact, while obviously he works on these systems and he finds them really impressive, there's a lot of marketing that goes into this terminology.

Brian Barrett: And just in case for folks, AGI, artificial general intelligence, the idea that AI systems can meet or exceed the capabilities of humans, I think, is a simple people will quibble with that definition, but that's the baseline definition of it. And so Will Knight, one of our senior AI reporters, was in China not too long ago and he came back with that exact readout. He was saying, "Yeah, they don't really care about AGIs." It's not a thing over there. It's not like that's not what they're racing for. Yeah.

Leah Feiger: So this week, Vittoria Elliott, our lovely politics writer, published an excellent story that truly made me laugh out loud, all about how the US Army is burning through its AI tokens. So a little over a month ago, DOD bragged that nearly half of its 3.5 million employees were using AI at work. We're really inundated with press releases basically from the government right now about how all AI pilled the federal workforce is at this moment. So about a month after this came out, members of the Army's Combat Capabilities Development Command, DEVCOM, received an email informing them that they were actually burning through AI tokens and needed to limit use. This email is amazing. Let me just read this quote to you guys real quick. Although the Army CIO announced in May 2026 that they were offering unlimited tokens, by mid-June, the Army CIO pool was exhausted of tokens and had to reestablish limits.

Zoë Schiffer: So not unlimited is what I'm understanding.

Leah Feiger: Super not unlimited.

Zoë Schiffer: Much like unlimited PTO.

Leah Feiger: Much like unlimited PTO. It's apparently unclear if the Army CIO pool is going to be renewed after the 1st of October. The Army uses Ask Sage, which is a multi-model generative AI platform where users can run different LLMs, including Gemini, Llama, ChatGPT, et cetera. And we talked to an Army employee who had some very funny things to say about this, which is basically the Army burned through a whole year of tokens in just a few weeks.