The effectiveness of US restrictions aiming to curb China’s development of AI has come under scrutiny after Chinese start-up DeepSeek released a chatbot rivalling those developed by US companies.
US officials are now investigating whether DeepSeek purchased NVIDIA chips through intermediaries in Singapore, effectively circumventing the AI restrictions the government had employed, Bloomberg reported. Nvidia said: “We insist that our partners comply with all applicable laws, and if we receive any information to the contrary, act accordingly.”
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Howard Lutnick, US President Donald Trump’s nominee for head of the Commerce Department, told senators on Wednesday he believed the restrictions did not work.
“Nvidia’s chips, which they bought tons of, and they found their ways around it, drive their DeepSeek model […] It has got to end. If they are going to compete with us, let them compete, but stop using our tools to compete with us. So I am going to be very strong on that,” Lutnick said. If confirmed as Commerce Secretary, he would be at the helm of enforcing semiconductor restrictions.
The US had been trying to restrict China’s AI development to prevent the country gaining a technological and military advantage. Many experts had already warned that the restrictions were not likely to be fully effective.
Chatham House associate fellow and UK Trade Policy Observatory director at the University of Sussex Michael Gasiorek told Investment Monitor earlier in January that, while he expected the US to continue with its AI restrictions, he was “less convinced that in the longer term the policy will be successful”. He added that “at best it may slow the development in China down” but that it might also “encourage China to invest the resources to develop its own semiconductor industry”.
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By GlobalDataThe release of DeepSeek’s chatbot R1 was poignant on two other fronts: it showed China’s AI development was at a more advanced stage than previously thought and DeepSeek claims it developed the model for a fraction of the price of its US counterparts. The company claims it only took two months and an investment of $6m (43.5m yuan) to build R1, using the less sophisticated Nvidia H800 chips.
Typically, AI development has been understood to be very expensive and resource-intensive. Investors have expressed worry about these high costs given the sector’s slow returns. The arrival of DeepSeek and R1 has put this framework into question. After the model’s release on Monday, Nvidia’s market value decreased by nearly $600bn, dropping a staggering 17%. It was the biggest single-day loss in the history of the US stock market.
