China's free AI model Kimi divides Trump's advisors on strategy

Over the weekend, tensions erupted within Trump's AI advisory circle over how to respond to Kimi, a free, open-source model launched last week by Chinese AI company Moonshot. David Sacks, who served as the president's AI and crypto "czar" until March, publicly criticized Anthropic's models as "lobotomized" and "woke," while Emil Michael, a top Pentagon official, called OpenAI's new head of strategic futures, Dean Ball, a "supreme village idiot." The conflict centers on a fundamental disagreement about China's free AI models and how the U.S. government should address them.

Kimi poses a concrete business problem for U.S. AI leaders. The model appears to rival the intelligence of offerings from OpenAI and Anthropic—companies whose paid access is central to the investment thesis driving outsized economic growth in U.S. equity markets. Every time a new, smart, free model from China is released, U.S. companies have less leverage to convince users to pay for access. Anton Leicht, a fellow at the Carnegie Endowment, noted on X that Chinese models are "a threat for an administration that really doesn't want more economic bad news," and they have already rattled U.S. stocks.

The strategic divide within Trump's orbit reflects competing worldviews. Sacks, no longer in a formal advisory role, has argued that top AI companies "want the government to eliminate their open source competition" and that Chinese models have become popular because they come with fewer restrictions on use. He contends that more open AI is better and that it is not the government's job to protect corporate interests. However, this view has been largely replaced in the administration by a position that sees a larger role for government intervention—based on the argument that AI models have become strong enough to pose threats to national security and therefore must be controlled by government action.

The new White House review process, which aims to vet AI models' security before release, embodies this interventionist approach. Ball, who now works for OpenAI, criticized the process over the weekend as a "de facto licensing regime for frontier AI." He suggested that Trump might solve the Chinese open-source problem through "soft power"—by quietly discouraging U.S. companies from using models like Kimi. Michael bristled at this characterization, dismissing the notion that government would "strong-arm companies" and insisting instead that any response would go through "the democratic process not some Deep State scheme."

A critical unanswered question concerns how China built Kimi despite limited computing power. Trump allowed Nvidia to sell more chips to China in exchange for government revenue, loosening export controls that had been a Biden-era priority. The government has alleged that some chip smuggling has occurred, but it remains unclear what chips trained Kimi. One possibility is distillation—a practice in which AI models are trained on the outputs of existing models. OpenAI and Anthropic have long complained that Chinese AI companies use this technique, and in April, the Trump administration announced efforts to curb the practice. Yet Kimi is now free and widely available, performing at a level nearly matching an Anthropic model that the U.S. government briefly shut down over national security concerns. The dispute among Trump's advisors suggests many see Kimi as a wake-up call, but there is no consensus on what action to take.

The release of Kimi reflects the erosion of U.S. chip export controls that had been a cornerstone of Biden-era China policy. Trump made the controversial decision to allow Nvidia to sell more chips to China in exchange for government revenue, loosening restrictions that were meant to keep advanced AI capabilities out of Chinese hands. Yet Kimi's emergence suggests that even with limited computing power, Chinese companies are finding ways to build competitive models—possibly through distillation, where they train on outputs from U.S. models like those from OpenAI and Anthropic.

The dispute among Trump's inner circle reflects deeper philosophical and political tensions. Sacks, whose formal role ended in March, represents a libertarian strain that opposes corporate protectionism and favors fewer restrictions on AI. Michael and others closer to the Pentagon take a national-security-first stance, arguing that AI's power demands government vetting and control. The White House review process Ball criticized represents this latter position—a shift from Sacks's preference for open markets toward state gatekeeping. Neither approach has momentum to become settled policy, leaving the administration without a coherent response as Chinese models undercut U.S. companies' market position and threaten the sector's outsized contribution to economic growth.