American data companies earn $500M a year from Chinese AI labs while also serving the Pentagon

The companies training America’s military AI are also cashing checks from Beijing’s top artificial intelligence labs. US data labeling firms collectively pull in roughly $500 million per year from China’s six leading AI operations, a commercial relationship that sits awkwardly alongside Washington’s escalating efforts to throttle Chinese access to advanced technology. The numbers behind the dual-client model Surge AI reported $1.2 billion in revenue in 2024, built on providing expert-annotated datasets to both US military branches and Chinese AI laboratories. The annotations are complex, domain-specific datasets used to train sophisticated AI models, the kind of work that requires genuine expertise and commands premium pricing. Mercor has been growing even faster, crossing an annualized revenue run rate of $2 billion by June 2026. Chinese contracts accounted for 2% of its Q2 2026 revenue. AfterQuery pulls in at least $50 million in recurring annual revenue from Chinese AI labs alone. Turing rounds out the group of notable US firms participating in this trade. On the buying side, the client list includes ByteDance, Alibaba, Ant Group, and Tencent. The Pentagon has designated Tencent...