The US Commerce Department is investigating DeepSeek, a Chinese artificial intelligence company, over allegations that it may have used advanced AI chips that are prohibited from being exported to China, as per a Reuters report.
DeepSeek recently launched an AI assistant that quickly gained traction, becoming the most downloaded app in Apple’s App Store within days.
The tool, which promises high efficiency with minimal data consumption, triggered concerns about China’s ability to develop cutting-edge AI despite US trade restrictions.
The launch and the subsequent hype triggered a massive selloff in US tech stocks, wiping out nearly $1 trillion in market value.
The investigation focuses on whether DeepSeek gained access to Nvidia’s high-performance AI chips, which have been restricted from sale to China under US export controls.
While DeepSeek has stated that it used Nvidia’s H800 chips—legally acquired in 2023—the US is probing whether it also accessed more powerful AI chips through indirect channels.
Despite this, DeepSeek’s model has outperformed Meta’s Llama 3.1, OpenAI’s GPT-4, and Anthropic’s Claude Sonnet 3.5 in independent benchmarks.
Furthermore, DeepSeek’s r1 reasoning model has surpassed OpenAI’s o1 in key areas like problem-solving, mathematics, and coding.
This has led many to doubt the startup’s claim of only using H800 and H20 chips.
Reports indicate that AI chip smuggling operations linked to China have been traced to Malaysia, Singapore, and the UAE, highlighting the challenges in enforcing trade controls.
AI chip restrictions on China’s AI sector
The US has been tightening its export controls to prevent China from accessing high-end semiconductors used for AI development.
These restrictions specifically target Nvidia’s most powerful AI chips, such as the H100, which is crucial for training large-scale AI models.
The Biden administration had already placed limitations on the sale of such chips to China, and the Trump administration’s trade officials are now considering additional measures.
DeepSeek’s access to Nvidia’s H800 and H20 chips is central to the investigation. While the H20 model is still legally permitted for export to China, US officials fear that more advanced chips may have reached Chinese AI firms through third-party markets.
The case has raised alarms over whether AI chip restrictions are being effectively enforced, as companies with business entities in Singapore or other jurisdictions could be circumventing US regulations.
Other accusations on DeepSeek
Apart from allegations of unauthorised use of Nvidia chips, DeepSeek has also been accused of stealing OpenAI’s code.
OpenAI has found indications that Chinese AI start-up DeepSeek may have used its proprietary models to train an open-source competitor, as per an FT report.
The ChatGPT maker told FT that it has evidence suggesting “distillation,” a technique that enables smaller models to replicate the performance of larger ones by learning from their outputs.
While distillation is a common industry practice, OpenAI is concerned that DeepSeek may have used it to develop a competing model, which would violate its terms of service.
Earlier, David Sacks, President Donald Trump’s AI and crypto adviser, suggested the possibility of IP theft. Speaking to Fox News, Sacks stated, “There’s a technique in AI called distillation… when one model learns from another model and kind of sucks the knowledge out of the parent model.”
He claimed there was “substantial evidence” that DeepSeek had done this with OpenAI’s models, though he did not provide specific proof.
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