Experts are warning that China is actively undermining America's technological dominance through AI without military conflict, citing strategies that include extracting logic from American AI models, flooding global markets with free open-source alternatives, and potentially weaponising these systems for cognitive warfare. This economic approach represents a significant competitive threat, particularly as major American corporations may adopt Chinese AI models for cost reasons despite security risks involving potential censorship and hidden backdoors.

The United States currently maintains a substantial computing advantage, with over 5,400 data centres compared to China's approximately 450, along with superior microchip technology. However, Chinese laboratories are rapidly closing this gap through "knowledge distillation"—a process where smaller models extract the logic from larger American models. This technique enabled the Chinese model DeepSeek to compete with cutting-edge American systems whilst using only a fraction of the development resources. The Department of Homeland Security recently issued a cybersecurity advisory warning of industrial-scale Chinese knowledge distillation campaigns targeting US AI capabilities. Experts express concern that because American AI technology is expensive whilst Chinese open-source alternatives are free, Fortune 500 companies may unknowingly adopt systems potentially embedded with CCP censorship or hidden backdoors.