American companies are increasingly adopting Chinese artificial intelligence models to cut costs, triggering urgent warnings from federal lawmakers who fear the shift could compromise national security and cede technological dominance to Beijing.
The trend has prompted a formal investigation. In April, the House Committee on Homeland Security and the House Select Committee on China launched a joint probe into why U.S. companies are embracing Chinese-developed AI systems despite geopolitical tensions. The committees have already sent investigative letters to Cursor and Airbnb, questioning their "use of or exposure to these risks" through Chinese AI technology.
The economic incentive is straightforward: Chinese AI models perform nearly as well as American alternatives while costing significantly less. Tech leaders aren't shy about the advantage. Brian Armstrong, CEO of crypto company Coinbase, and Flo Crivello, founder of AI startup Lindy, have publicly championed Chinese models to reduce expenses. Cursor, which will be acquired by Elon Musk's SpaceX for $60 billion, actually built its Composer 2 model using Kimi, a Chinese AI system developed by Moonshot AI.
The Security Concern
U.S. officials argue the stakes extend far beyond cost savings. Andrew Garbarino, chairman of the House Committee on Homeland Security, told CNBC that Chinese AI capabilities now rival American ones in critical areas. "The Chinese Communist Party is no longer just nipping at our heels in artificial intelligence; it is racing to close the gap in some of the exact capabilities that will shape the future of cybersecurity," Garbarino said. He specifically flagged that "a Chinese open-weight model can match leading U.S. models in certain vulnerability discovery and cybersecurity tasks."
A State Department spokesperson raised broader concerns about the models themselves. "The growing use of Chinese AI models by U.S. companies raises serious concerns," the official said, noting that these "AI models are designed to advance Beijing's narratives, censor dissent, and reflect CCP ideology and values." Some federal agencies have already moved to restrict access—several government departments have banned Chinese AI models including DeepSeek—but no government-wide prohibition applies to private companies.
The Policy Gap
Lawmakers are grappling with a genuine dilemma. Kyle Chan, a fellow at the Brookings Institution's John L. Thornton China Center, explained the practical obstacle: "It's ultimately impossible to ban China's open-source AI models because their model weights are available freely on the internet." He added that enforcement could trigger First Amendment complications.
Daniel Remler, senior fellow in technology and national security at the Center for a New American Security, said the Trump administration is "clearly worried" about the risks but faces real constraints. "Restricting their use is going to be difficult," Remler told CNBC. He noted the administration may worry that cracking down on Chinese models could harm startups that depend on them or discourage support for open-source AI development generally.
Instead of outright bans, federal officials are considering alternatives. Remler outlined two potential approaches: procurement requirements that discourage government contractors from using Chinese AI models, or releasing detailed findings about vulnerabilities in Chinese systems to help U.S. companies make informed decisions. "Regardless, I do expect both the Executive Branch and Congress to communicate their interest not to see U.S. companies adopting these models," Remler said.
Andy Ogles, chairman of the Subcommittee on Cybersecurity and Infrastructure Protection, framed the issue starkly a month ago. "When the cheap, capable, easy option for an AI model is Chinese, the rest of the world will build on it," Ogles said in June. He warned that without intervention, "Chinese models become the default foundation of the global digital economy, carrying embedded censorship, uncertain security, and capabilities distilled from our own laboratories with the safety guardrails stripped off."
Airbnb has pushed back against the investigation's implications, telling CNBC that its "AI activity runs overwhelmingly on U.S.-origin models" and that any China-origin systems it uses are "open-source and run only through approved U.S.-based service providers, keeping data and operations separate and protected." Cursor declined to comment on the probe.
China's government has rejected the scrutiny. A spokesperson for the U.K. embassy of the People's Republic of China told CNBC the country "opposes baseless allegations and malicious smears against its AI development," adding that "China's thriving AI sector is built on self-reliance and strength in science and technology."
Why This Matters:
The shift toward Chinese AI models reflects a market failure: American companies are rationally choosing cheaper alternatives because the U.S. hasn't ensured affordable, capable domestic options exist. This creates a structural problem where cost-conscious businesses—particularly startups with limited budgets—face a false choice between expensive American models or cheaper Chinese ones. The investigation signals that policymakers recognize the government may need to intervene through procurement rules, subsidies, or public investment to make American AI competitive without forcing companies to choose between profit and national security concerns. Without deliberate policy action, market forces alone will likely accelerate adoption of Chinese systems, potentially embedding foreign technology into America's digital infrastructure at scale.