Washington, Sept. 9 -- United States federal agencies have alleged that Chinese artificial intelligence companies are executing "industrial-scale" theft of American competitors' trade secrets to cut development costs and accelerate market deployment.

According to a joint advisory released on Tuesday by the Federal Bureau of Investigation, National Security Agency, and the Cybersecurity and Infrastructure Security Agency, major Chinese technology enterprises are deploying "distillation" techniques, training smaller models on more advanced architectures, to "extract restricted proprietary functionalities and capabilities of US frontier AI models."

While American authorities and tech executives acknowledge that distillation can function as...