China’s Moonshot AI stole from Anthropic's most sophisticated AI large language model, Fable, to help create its latest K3 release and has acquired advanced Nvidia AI chips, top Trump administration tech official Michael Kratsios said on Wednesday.

“We have information that Moonshot AI distilled Anthropic’s Fable for the development of its K3 model,” he said in a post on X.

“Large-scale, covert industrial distillation aimed at stealing proprietary US technology and undermining American research is unacceptable.”

US Treasury Secretary Scott Bessent also said on Wednesday in a separate post on X that he was considering adding Moonshot AI to a trade blacklist and imposing sanctions.

The Trump administration’s accusations will likely ramp up tensions over technology issues between Beijing and Washington as firms from both countries introduce increasingly powerful AI models that have broad economic implications and potential military uses.

Moonshot did not immediately respond to a request for comment. Spokesperson Liu Chang of the Chinese embassy in Washington called Kratsios’ comments “entirely unfounded,” adding that China respects intellectual property protections.

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“Relevant individuals in the United States should respect the facts, discard prejudice and stop smearing and discrediting China’s achievements in the development of its artificial intelligence industry,” he said.

Anthropic public policy executive Sarah Heck said in a post on X that Chinese theft of US models “creates serious national security risks for the United States.”

Distillation is the process of training smaller AI models using output from larger, more expensive ones as part of an effort to lower the costs of training a powerful new AI tool.

Kratsios also said Moonshot AI had acquired servers containing powerful Nvidia AI chips called GB300s and had used them in Thailand, “likely to train its AI models.”

A senior Trump administration official said in February that Chinese AI startup DeepSeek’s latest AI model was trained on Nvidia’s most advanced AI chip, in what could represent a violation of US export controls.

The US State Department ordered a global push in April to bring attention to what it says are widespread efforts by Chinese companies, including Moonshot AI, to steal intellectual property from US artificial intelligence labs, according to a diplomatic cable seen by Reuters.

Distillation is the process of training smaller AI models using output from larger, more expensive ones as part of an effort to lower the costs of training a powerful new AI tool.

In February, Anthropic said three Chinese artificial intelligence companies used its Claude model to improperly obtain capabilities to improve their own models.

DeepSeek, Moonshot, and MiniMax created more than 16 million interactions with Claude using roughly 24,000 fake accounts, in violation of Anthropic’s terms of service and regional access restrictions, the company said.

OpenAI has warned US lawmakers that DeepSeek was targeting the ChatGPT maker and the nation’s leading AI companies to replicate models and use them for its own training, Reuters reported in February.

The April cable from the State Department said: “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.”

Chinese AI startup Moonshot on Friday unveiled Kimi K3, a 2.8 trillion-parameter model that it said is the world's largest open-weight AI system and delivers performance approaching US giant Anthropic’s frontier Fable model.

The launch, which comes a month after Anthropic’s Fable and Mythos models were abruptly withdrawn by the US government due to security concerns, underscores how quickly China's open AI ecosystem is narrowing the gap with the most advanced US systems.