What Is AI Distillation and Why Is It a Worry for the Industry?

AI developers are increasingly concerned that competitors can use the outputs of expensive, large-scale models to train smaller, much cheaper systems, a process known as distillation. This practice threatens the financial viability of companies investing billions in original AI research, as low-cost rivals may be able to replicate high-end performance at a fraction of the development expense. If smaller models prove effective enough to replace proprietary giants, the industry may struggle to justify the massive capital expenditures currently driving the sector.