At a time when some Silicon Valley giants and national security experts are calling for action against Chinese companies engaged in model distillation, Garry Tan, chief executive of famed startup accelerator Y Combinator, is less concerned.
"I would do nothing" about distillation, he told CNBC's Kate Rooney at Y Combinator's annual Demo Day. "We could argue that there should be an American distillation regime."
Distillation is the process of using the outputs of a more capable AI model to train a smaller or less capable one, sometimes illicitly. It has been a major point of concern for frontier model developers, namely OpenAI and Anthropic. Anthropic has accused Chinese companies such as Moonshot AI, DeepSeek, and MiniMax of the practice, while OpenAI believes DeepSeek's V3 and R1 model architectures were distilled from its own GPT-4 and GPT-4o models.
In the midst of this, the U.S.'s National Security Agency, Cybersecurity and Infrastructure Security Agency, and Federal Bureau of Investigation released an official cyber security advisory warning on the topic on Tuesday.
But Tan believes regulators should focus less on curbing distillation and more on creating an equilibrium between open weight models and frontier models — as long as frontier models retain a price premium that allows their business model to remain feasible.