US officials are investigating whether Chinese AI startup DeepSeek sourced advanced Nvidia (NASDAQ: NVDA) processors through distributors in Singapore, potentially circumventing U.S. sanctions on high-end AI chips, according to a Bloomberg report.
DeepSeek’s Alleged Use of Banned Nvidia Chips
The probe seeks to determine whether DeepSeek bypassed export restrictions and used Nvidia’s most advanced AI chips to develop its R1 model, which recently shook the AI market. U.S. sanctions prohibit the sale of high-performance GPUs, such as the H100, to Chinese firms without a license.
The timing of the investigation follows DeepSeek R1’s unexpected success in AI performance benchmarks, challenging ChatGPT while claiming to operate on older and less expensive hardware. The chatbot became the most downloaded free app on Apple’s App Store, raising concerns over how the company achieved such technological breakthroughs.
Conflicting Reports on DeepSeek’s Hardware
- Officially, DeepSeek claims it uses 10,000 Nvidia A100 chips, a less advanced and export-compliant version of Nvidia’s AI processors.
- However, Scale AI CEO Alexandr Wang alleged that DeepSeek actually possesses 50,000 Nvidia H100 chips, which are banned for export to China. He did not provide evidence to support this claim.
- If the U.S. determines that DeepSeek acquired these chips through a third-party distributor in Singapore, it could trigger serious legal consequences for both DeepSeek and the suppliers involved.
Implications for Nvidia and AI Stocks
The U.S. investigation follows a turbulent week for AI stocks, as DeepSeek’s unexpected rise sent shockwaves through Silicon Valley. Nvidia lost nearly $600 billion in market value, as investors questioned whether billions of dollars poured into AI infrastructure were justified when cheaper, seemingly more efficient alternatives like DeepSeek R1 emerged.
Microsoft (NASDAQ: MSFT) is also reportedly investigating whether DeepSeek improperly accessed proprietary OpenAI data, further intensifying concerns over China’s rapid AI development.
As the Biden administration tightens AI export controls, the findings of this probe could lead to stricter enforcement of chip sales and further escalation in U.S.-China tech tensions.
Source: Bloomberg
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