Are the small model, light compute, open source models a threat?

It seems obvious that Paul Scharre, Greg Allen and the Biden administration are right:

Scharre said to Jordan on China Talk: "...compute - access to AI chips - is the key point of leverage over access to AI capabilities..." (https://link.chtbl.com/ChinaTalk); and,

Greg Allen agrees with the Biden chip strategy (https://www.csis.org/analysis/choking-chinas-access-future-ai): "In short, the Biden administration is trying to (1) strangle the Chinese AI industry by choking off access to high-end AI chips; (2) block China from designing AI chips domestically by choking off China’s access to U.S.-made chip design software; (3) block China from manufacturing advanced chips by choking off access to U.S.-built semiconductor manufacturing equipment; and (4) block China from domestically producing semiconductor manufacturing equipment by choking off access to U.S.-built components."

But how should we assess the power of the fast moving advances in small, even locally run, open source models summarized in the leaked Google memo (https://www.semianalysis.com/p/google-we-have-no-moat-and-neither)? Apparently they can be almost as good. Does all this make deploying a practical level of AI (not for autonomous applications but for assisting human performance) more achievable for the Chinese even in the face the chips embargo?

(Sorry....I'm trying Notes for the first time and can't figure out how to put this comment in the best place....)

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