How are Point 1, "We should not sell powerful chips or chipmaking equipment to China," and Point 2, "We should crack down on industrial-scale distillation operations," addressed by making open-weight models illegal?

Point 1 is about restricting the sale of chips, not models. Point 2 concerns companies using closed models to train their own models through distillation.

The real issue is that open-weight models can run on much less powerful hardware, making the current AI business model, where companies train a powerful model and gatekeep access to it, less relevant. Once open-weight models become good enough, much of the future revenue for today's leading AI labs could disappear. But just as Microsoft still has a market so will the large AI houses have one, but the moat will not be providing AI responses.