Washington Takes Aim at DeepSeek and Its American Chip Supplier, Nvidia

New York Times

16-04-2025

Two months after DeepSeek, China's artificial intelligence star, rattled Washington and shook Wall Street, U.S. officials are taking steps to crack down on the Chinese start-up and its support from America's leading chip maker, Nvidia.
The Trump administration this week moved to restrict Nvidia's sale of A.I. chips to China. It also is weighing penalties that would block DeepSeek from buying U.S. technology and debating barring Americans' access to its services, said three people with knowledge of the actions who spoke on the condition of anonymity.
Congressional leaders are also putting pressure on Nvidia. On Wednesday, the House Select Committee on the Chinese Communist Party, which focuses on national security threats from China, opened an investigation into Nvidia's sale of chips across Asia. It is trying to assess whether the U.S. chipmaker knowingly provided DeepSeek with critical technology to develop A.I., potentially in violation of U.S. rules.
It is the first Congressional investigation into Nvidia's business. It comes as the Trump administration wrestles with how to implement a Biden-era rule that limits the number of A.I. chips that companies can send to different countries.
The attacks on DeepSeek and Nvidia are an outgrowth of fear in Washington that China could leapfrog the United States in A.I., which would have wide-ranging implications for national security and geopolitics. If China took the lead, it could more quickly use A.I. systems to design next-generation weapons like autonomous missiles and drones. It also could persuade other countries to use its technology for their network of A.I. systems and infrastructure, weakening U.S. influence across the world.
Klon Kitchen, a senior fellow at the American Enterprise Institute who focuses on national security and technology, said that the U.S. strategy with A.I. has been to use its current lead in making A.I. chips and systems to persuade countries to ally with the United States.
The competition between Washington and Beijing for technological supremacy has scrambled the semiconductor business. In the wake of the Trump administration cracking down on chip sales to China this week, Nvidia and another chip maker, Advanced Micro Devices, said they would lose billions of dollars in sales. ASML Holding, the Dutch company whose machines are essential for manufacturing the most advanced semiconductors, said on Wednesday that orders for its equipment had fallen short of expectations.
On Wednesday, shares of Nvidia and A.M.D. fell more than 7 percent. ASML shares were down 5.4 percent.
Nvidia didn't immediately respond to a request for comment. Speaking in March at Nvidia's annual conference, Jensen Huang, the company's chief executive, said, 'We have a fundamental obligation to run our business, obeying laws and doing our best to compete and serve customers.'
In January, DeepSeek jolted the tech industry after the release of a new A.I. system called DeepSeek-V3 that it claimed to have trained for $6 million, roughly a tenth of what U.S. companies were spending.
The low-cost system challenged the industry's consensus that bigger and better A.I. systems would be built by companies that spent the most on chips and data centers. Shares of Nvidia, which controls the A.I. chip market, plummeted 17 percent in a single day, reducing its market valuation by $600 billion.
'DeepSeek's claims sent everyone through the roof because it showed we're one moment away from the centerpiece of American policy being undermined,' Mr. Kitchen said.
At a conference with industry executives in Washington in March, Commerce Secretary Howard Lutnick, who oversees U.S. technology controls, said the Trump administration would pursue 'a dramatic increase' in enforcement of U.S. tech restrictions on China, including imposing fines on companies.
'We have had enough of people trying to make a dollar supporting the people who seek to destroy our way of life,' Mr. Lutnick said, referring to China.
Last week, Mr. Lutnick made good on his promise. The Commerce Department notified Nvidia of new restrictions on its sale of A.I. chips to China. The limits mean Nvidia will need a license to sell a chip they specially made for China, the H20. The company had developed that chip by modifying the abilities of a leading A.I. chip, the H100, to comply with the Biden administration's performance thresholds for sales to China.
The crackdown on Nvidia came after White House and Commerce Department officials received briefings in recent weeks about the national security risk posed by DeepSeek. The briefings included details about the ties that some of its researchers have to the People's Liberation Army and other institutions in China sanctioned for aiding the Chinese military, a person familiar with the conversations said.
The findings, which were compiled by Exiger, a data analytics firm, and reviewed by The New York Times, showed that dozens of DeepSeek's researchers have or have previously had affiliations with P.L.A. laboratories or defense-research institutes in China. They had worked with groups that included an institute that develops and tests China's nuclear weapons, universities known as the 'seven sons of national defense' and organizations barred from buying American technology by the U.S. government.
It is common for private companies in China to have close ties to state-backed industries and create technology for state-funded projects. But the research indicates that DeepSeek, which claims to be a private company not linked with the state, has closer ties with the Chinese military and government than previously understood, said Kit Conklin, a senior vice president at Exiger, who wrote the report.
DeepSeek did not respond to a request for comment.
In February, the congressional committee on China began work on a separate report seeking to explain how DeepSeek made its technological leap. It cited estimates by SemiAnalysis, a semiconductor research firm, that DeepSeek had access to 60,000 Nvidia chips, including 20,000 that have been restricted from China.
The committee said that DeepSeek and other Chinese A.I. companies may have circumvented U.S. restrictions on buying Nvidia chips by purchasing them through intermediaries in Singapore. It cited a report by Reuters in February, that Singaporean authorities arrested three people for illegally exporting advanced Nvidia chips to DeepSeek in China.
In the letter opening its investigation into Nvidia, the committee asked the company to provide details about every customer from 11 Asian countries, including Malaysia and Singapore, who purchased 500 A.I. chips or more since 2020. It also asked for details about the companies who were expected to use those chips.
The committee has subpoena power and expects Nvidia to provide responses within two weeks, said a committee official who spoke on the condition of anonymity. It typically spends more than four months on an investigation before generating a report on an issue and calling a hearing, which it may do with Nvidia.
The investigation comes as the Trump administration evaluates a proposed government rule to provide more oversight over Nvidia's global chip sales. The Biden administration rule, which Mr. Lutnick and other Trump officials are reviewing, would dictate where A.I. chips could be shipped and require more disclosures about the customers using American technology.
Tech companies have protested the rules, saying they threaten sales and U.S. technology influence around the world.
In a statement, Representative John Moolenaar, a Michigan Republican and the committee's chair, said that DeepSeek's use of Nvidia's chips could be considered 'a national security failure.' 'U.S. companies should not enable a hostile regime's drive to dominate A.I. and challenge the free world,' he said.
Nvidia has previously said that its record of revenue from Singapore does not 'indicate diversion to China,' and it is a result of its practice of reporting the country where purchases are made, not necessarily where chips are shipped. 'We insist that our partners comply with all applicable laws, and if we receive any information to the contrary, act accordingly,' John Rizzo, a Nvidia spokesman, said in a January statement.
The congressional report also found that DeepSeek used data from OpenAI to accelerate the development of the Chinese company's A.I. system. In a memo from OpenAI to the committee, which was reviewed by The New York Times, OpenAI said DeepSeek employees had bypassed guardrails meant to prevent that kind of data harvesting.
Using data from one A.I. system to build another, a technique called distillation, is common. But if a company takes data from proprietary technology, the practice could be illegal.
(The New York Times has sued OpenAI, claiming copyright infringement of news content related to A.I. systems. OpenAI has denied the claims.)
OpenAI called on Congress to 'safeguard U.S. technological leadership.'