Anthropic’s Alibaba fight raises a trillion-dollar question for IPO: How defensible is a frontier AI moat against China with Washington’s toolbox?

Anthropic has alleged Alibaba found a cheaper way to close the already narrowing AI gap: Not by stealing servers or smuggling chips, but by using fake accounts and innocuous interactions with Claude to extract its capabilities and train competing systems at a fraction of the cost. Leading IPO expert Jay Ritter told Fortune that Alibaba’s distillation could either strengthen Anthropic’s IPO story by positioning the company as strategic in the U.S-China rivalry or lead investors to question Anthropic’s future profitability if its frontier AI moat isn’t defensible. “Both points of view have merit, but I think that second point about affecting profitability would be the dominant one,” he said. “Right now the growth rate of Anthropic’s revenue has been incredible, but how much they’ll be able to sustain that is a big question mark.” Now Anthropic is turning to Washington for help, with Sarah Heck, Anthropic’s head of policy, urging Congress to penalize China’s behavior through “export controls on advanced American compute.” For now, the federal government can’t meaningfully undo the potential damage to Anthropic’s competitive edge through export controls, which are designed to restrict hardware like chips and foreign access to tangible software like Mythos and Fable, but are powerless against the kind of distillation attack Anthropic is alleging. “Querying it through an API is not exporting the model, and that’s what the latest controversy has been about,” Kevin Wolf, a former assistant secretary of commerce for export administration, told Fortune. But the Trump administration denounced unauthorized distillation in an April memo that called the alleged efforts of Chinese companies to distill U.S. frontier models “unacceptable.” And with the momentum of Anthropic’s new allegations against Alibaba, reviving the idea of updating export controls to better protect U.S companies is on the table, Wolf added. He mentioned the Remote Access Security Act introduc