China's AI Counterattack: Is Silicon Valley in Open Conflict or Closed War?

[Block Media Reporter James Jung] China's artificial intelligence (AI) is rapidly catching up with the United States. There is indeed a technological gap, but the U.S. believes it may not be caught up just yet. The real issue lies elsewhere. There is a divide within the U.S. on whether to adopt an open (open-weighted) or closed model for AI.

Silicon Valley is effectively in a state of civil war. China's AI counterattack has been successful in this regard, as it has led the enemy to self-destruct.

China's AI Counterattack

As Silicon Valley is divided over the approach to AI development, China's AI shows a frightening growth trend. Once lagging in advanced AI development, China is actively embracing an open-source strategy. Chinese startups like Z.ai and Moonshot AI have been releasing models that rival those of major U.S. companies.

Notably, these Chinese systems are open. Programs can be shared by anyone, allowing users to build their own systems at low costs. Even U.S. companies have begun to show interest in the cheaper Chinese AI, questioning whether they need to pay high prices for American-made AI.

In response, leading U.S. AI companies have strongly criticized Chinese firms for allegedly inappropriately collecting their system data and cleverly 'distilling' it to create models. The U.S. government is also poised to implement protective measures for its own AI, which inevitably leads to closure.

U.S. AI: Open vs. Closed Civil War

Amid China's aggressive pursuit, the U.S. AI industry has split into two camps: 'Closed' and 'Open-source'.

Leading AI companies supporting the closed model argue that cutting-edge models are too dangerous and should be developed under strict corporate control. Recently, an unprecedented incident occurred where an AI model undergoing cybersecurity testing went out of control, accessed the internet, and hacked into other companies' servers, emphasizing the need for closure and accountability. Ironically, the companies involved in the security incident were Anthropic and OpenAI, who claim, "It's dangerous, so we will manage it exclusively."

They spread fears that AI could turn into a villain like those in science fiction movies, underscoring the necessity for regulation. This has led to criticism that the leading players are employing clever tactics to suppress the newcomers.

In contrast, latecomer AI companies and other tech firms argue that the open-source model should remain open to foster technological advancement and create new business opportunities. Ironically, Hugging Face, the company that suffered from the aforementioned hacking attack, has utilized Chinese firms' open-source AI models to defend its own system.

Interests of Each Camp

Behind this confrontation lies a complex web of business interests for each camp.

The closed camp is extremely wary of the situation where expensive models developed at great cost flow into China and lose their value. Under the pretext of protecting intellectual property (IP) and national security, they are lobbying for U.S. government agencies to conduct mandatory security assessments on new AI models.

On the other hand, the open camp's large tech companies actively support open-source because the more people use open-source models, the greater the demand for their cloud computing services and AI chips.

Additionally, over 200 small Silicon Valley startups criticize the tightening regulatory moves of leading companies as acts to solidify their monopolistic positions by effectively blocking the entry of latecomers. They have urged the government not to restrict access to China's open-source models, advocating for innovation and business over security ideology.

Key Figures in Each Camp

Open-source Camp

• Jensen Huang, CEO of Nvidia: Stated, "The world needs both closed cutting-edge models and open cutting-edge models."
• Satya Nadella, CEO of Microsoft: Emphasized that open-source software is essential for a healthy AI ecosystem, agreeing with Jensen Huang's statement.
• Clement Delangue, CEO of Hugging Face: After defending against the hacking attack, declared, "Victory for open models!" and announced plans to hold a rally in San Francisco to support open-source technology.
• Sundar Pichai, CEO of Google: Joined the industry's open-source support letter, stating that the company has long benefited from and contributed to open-source.
• Bill Gurley, Venture Capital Investor: Criticized the current regulatory moves as a "fight between factions trying to own everything and everyone else." David Sachs, Trump's AI czar, also expressed opposition to the so-called 'regulatory capture,' aligning with Bill Gurley's stance.

Closed Camp (Regulation Support)

• Sam Altman, CEO of OpenAI: Publicly supports open-source but quietly lobbied the government for mandatory security assessment policies internally.
• Sarah Heck, Head of Public Policy at Anthropic: Strongly criticized the unauthorized replication by Chinese companies as "intellectual property theft supporting hostile military and intelligence capabilities and industrial espionage."
• Scott Bessent, Treasury Secretary: Suggested that "open-source cannot become a hunting ground for U.S. intellectual property," indicating strong sanctions.
• Michael Kratsios, Science and Technology Adviser to the Trump Administration: Warned that large-scale industrial replication that steals U.S. technology and undermines research cannot be tolerated.

Centrist Camp

• Demis Hassabis, Co-founder of Google DeepMind: Proposed the establishment of an industry-leading AI standards organization, arguing that innovation and security should be encouraged simultaneously based on cautious optimism.

Semiconductor chip manufacturers and tech giants with cloud services prefer open models. They believe that technology should be open so that more companies can utilize their products and services.

Leading AI developers prefer closure and regulation, seeking to protect their technology with the help of government power. Venture capitalists criticize this as regulatory capture.

As Silicon Valley engages in civil war, attention is drawn to what 'goods' China will present next.

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