Sequoia Warns of U.S. Closed-Source Model Lead, Open Foundation May Be Handed to China

Sequoia partners Dean Meyer and Konstantine Buhler have pointed out that the U.S. is leading in closed-source models, but Western companies are increasingly relying on China's open-weight models. Qwen, Kimi, GLM, and DeepSeek are being used for product foundations, training teachers, and synthetic data sources. An ATOM report shows that Qwen's share in monthly new fine-tuning and adaptation models has risen from 1% in January 2024 to 69% in February 2026. Thinking Machines' Inkling has also used synthetic data generated by open-weight models like Kimi K2.5 in the early stages of post-training, but this accounts for only a small portion of the training compute. The article points out that the issue lies in the "distillation" rules, where OpenAI and Anthropic restrict customers from using model outputs to train competing products, while U.S. companies can legally learn from China's open models. The two suggest that U.S. frontier labs should sell controlled, delayed, and auditable training rights to qualified companies; otherwise, the U.S. may lead in closed-source models but hand over the open model foundation to China. China has recently discussed limiting overseas access to some advanced models, but no final policy has been formed yet. The article warns that even if existing models remain downloadable, Western companies may gradually fall behind due to the inability to access subsequent versions.

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