Bloomberg quoted insiders as saying that US officials are investigating whether DeepSeek, a Chinese artificial intelligence (AI) startup, purchases NVIDIA advanced semiconductors through a third party in Singapore in order to circumvent the US restrictions on chip sales for AI missions in China.

DeepSeek recently released a chatbot called R1, which performs similarly to similar tools in the United States in some aspects and has been recognized by the market as a key competitor to OpenAI's ChatGPT. This indicates that China's leading advantage in the AI competition is greater than previously thought. Some well-known engineers have praised the capabilities of R1, and DeepSeek has also boasted about the tool's low cost and high efficiency, prompting competitors to speculate whether it is built on Western technology.

(Source: Reuters)

According to anonymous sources, officials from the White House and FBI are also trying to determine whether DeepSeek purchased Nvidia AI chips that have been banned from being sold to China by the United States through intermediaries in Southeast Asian countries.

A spokesperson for NVIDIA emphasized in a statement, "We insist that our partners comply with all applicable laws, and if we receive any contrary information, we will take appropriate action

Nvidia issued a statement on DeepSeek earlier this week stating that it believes the Chinese company has not violated any restrictions imposed by the United States.

On Wednesday, Howard Lutnick, the Commerce Secretary selected by US President Trump, hinted that DeepSeek had evaded US export controls.

They purchased a large number of Nvidia chips and found ways to bypass them, which drove their DeepSeek model, "Lutnik told senators during Wednesday's confirmation hearing, stating that he will enforce semiconductor trade restrictions as Secretary of Commerce.

He continued, "This situation must end. If they want to compete with us, let them compete, but don't compete with us with our tools. So I will be very firm in insisting on this

DeepSeek, a company based in Hangzhou, released its R1 model earlier this month, which can mimic human reasoning and pose a potential threat to the market dominated by OpenAI and American competitors, leading to a $1 trillion market crash.

This major breakthrough has sparked a debate about the effectiveness of the United States' attempt to cut off China's supply of advanced technology. These restrictions cover various chips and their manufacturing tools, aimed at slowing down China's efforts to develop the semiconductor industry and preventing China from acquiring AI technology that could bring military advantages to the country.

Although DeepSeek has not yet fully determined which AI semiconductor it will use to develop its model, its researchers stated in their paper that the V3 model released last month was trained on 2048 Nvidia H800 chips. After the Biden administration cut off China's access to a series of more powerful versions, Nvidia developed the H800 for the Chinese market.

Subsequently, US officials banned the sale of H800 and other Nvidia chips to China in October 2023, prompting Nvidia to design another chip with poorer performance, the H20, for the Chinese market. According to Bloomberg, officials in the Trump administration are currently conducting preliminary discussions on whether to also restrict H20 chips, continuing the policy debate that began at the end of President Biden's term.

While expanding the ban on selling chips to China, the United States has also expanded the geographical scope of trade rules to cover more countries.

In 2023, the Biden administration imposed restrictions on more than 40 countries, and officials are concerned that these countries may act as intermediaries for transporting chips to China, including most of the Middle East and parts of Southeast Asia, but not Singapore.

Earlier this year, the Biden administration further expanded the rules to cover most of the world except for a few US allies. Nowadays, like most countries, large goods shipped to Singapore also require a license. Goods from less than 1700 processors only require notification.

According to regulatory documents, Singapore accounts for approximately 20% of Nvidia's revenue. But according to these documents, 'most of the shipments related to Singapore's revenue are sent to regions outside of Singapore, and the shipment volume to Singapore is negligible'.

A spokesperson for Nvidia stated that revenue related to Singapore does not indicate that funds have flowed into China. Our public documents show that the bill is sent to the customer's location instead of the shipping location, "he said. Many of our clients have business entities in Singapore and use these entities to sell products to the United States and Western countries

In a letter to National Security Advisor Mike Waltz on Wednesday, senior officials from both the Democratic and Republican parties of the U.S. House of Representatives' China Subcommittee mentioned Nvidia's revenue in Singapore. Representatives John Moolenaar and Raja Krishnamoorthi wrote, "If countries like Singapore are unwilling to crack down on exports to China, they should accept strict licensing requirements.