Nearly 200 Silicon Valley companies, including Proton and Y Combinator, are urging the Trump administration not to cut off access to open-source Chinese AI models or risk crippling the next generation of American startups.

On Wednesday, the newly formed Little Tech Association sent letters to President Donald Trump, Commerce Secretary Howard Lutnick and other members of the administration with its appeal, marking the first coordinated effort by Silicon Valley’s influential startup community to weigh in on one of the Trump administration’s most closely watched AI debates. The question is whether Washington should restrict access to increasingly powerful open-weight AI models (that is, AI models whose weights are publicly available) released by Chinese companies such as Moonshot AI and Alibaba.

“American leadership requires two things: world-leading open-weight American models and continued access for American builders to open models already available around the world,” the startup’s founders wrote in the letter obtained by POLITICO, also sent to Office of Science and Technology Policy Director Michael Kratsios. Instead of broad bans, they argue the government should adopt specific safeguards.

And they warn that banning Americans from downloading Chinese open-weight models would not stop their proliferation, but would weaken American startups.

“There will be hundreds of companies that will die instantly,” Suhail Doshi, founder of AI infrastructure startup Particle and a member of the association, which POLITICO first wrote about exclusively, said in an interview. “It’s great for Anthropic. We’re all going to have to spend money on Anthropic.”

The issue took on new urgency after it was reported that the Trump administration was considering banning Chinese AI models, shortly after Moonshot AI unveiled its powerful Kimi K3 model.

“The United States leads the world in AI innovation, and President Trump will continue to do so. The Trump Administration is doubling down on innovation to widen the gap between the United States and the rest of the world,” White House spokeswoman Liz Huston said in a statement to West Wing Playbook.

A White House official who requested anonymity to discuss the possibility of taking action against the Chinese models said: “Any policy announcement will be announced directly by the administration. Any reports until then are unfounded speculation.”

Those reports sparked panic in the Silicon Valley startup community, where many founders rely on cheaper Chinese open models to build products and lack the resources to spend big on usage credits from American AI companies like Anthropic and OpenAI. Among their fears: that banning these models would greatly benefit a handful of AI giants.

It also sparked discussions Monday night about the matter among senior members of the White House and Cabinet, according to two people familiar with the matter who were granted anonymity to discuss private discussions. But the idea of ​​an outright ban on Chinese openweight models was not seriously discussed.

Still, administration officials have continued to ramp up their rhetoric against Chinese AI developers.

Treasury Secretary Scott Bessent said Tuesday on Fox Business’ “Mornings with Maria” that the administration would investigate whether Chinese artificial intelligence companies had improperly distilled American models to boost their own, saying the United States can “sanction” companies that engage in intellectual property theft.

On Wednesday, Kratsios said the administration had information that Moonshot AI distilled Anthropic’s Fable model while developing K3, alleging that the Chinese company built “a sophisticated internal platform” to conduct large-scale distillation against U.S. models while trying to evade detection. Kratsios also alleged that Moonshot had acquired Nvidia GB300-equipped servers to train its models, despite a ban on their sale to Chinese entities.

Kratsios emphasized that the administration “strongly supports the free and fair development of AI, including a thriving competitive ecosystem that encompasses frontier models, specialized systems, open source frameworks, and open weight models,” while drawing a distinction between the distillation of legitimate models and industrial-scale theft.

Moonshot has not publicly addressed the allegations. As of Wednesday, the Commerce Department, which maintains a list of companies subject to export controls and licensing restrictions, called the Entity List, had made no plans to include Chinese AI companies, according to the first person.

The group’s stance against banning open weight models also reflects a growing divide within the AI ​​industry, with heavyweights like Anthropic increasingly urging more restrictions on Chinese AI developers over security concerns, and startups arguing that bans would help little but put them at a competitive disadvantage.

Little Tech Association CEO Harry Godfrey said in an interview that policymakers should use “a scalpel instead of a sledgehammer.”

“The answer here would be: What is the lightest way that doesn’t increase costs, limit access or inhibit American innovation and at the same time address” legitimate security concerns?, he said.

This story originally appeared in POLITICO and is courtesy of the Axel Springer Global Reporters Network, which leverages the resources of the company’s newsrooms to publish ambitious scoops, investigations, interviews, opinion pieces and analysis. It allows journalists, including those at POLITICO, Business Insider, WELT, BILD, Onet and Fakt, to collaborate on important stories for an international audience of hundreds of millions across all platforms.