Chinese AI Giant DeepSeek Branded "Profound Threat" as US Intensifies Nvidia Export Controls
The United States has designated Chinese AI company DeepSeek a national security risk while imposing new chip export restrictions, escalating the technological cold war amid allegations of data theft and export control violations
In a dramatic escalation of US-China technological tensions, a bipartisan congressional committee has branded Chinese artificial intelligence company DeepSeek a "profound threat" to US national security, while simultaneously tightening restrictions on advanced chip exports to China. The dual moves have sent shockwaves through the semiconductor industry, with Nvidia facing a $5.5 billion financial hit and its CEO making an urgent diplomatic visit to Beijing amid the controversy.
Congressional Committee Alleges DeepSeek Poses Serious Security Risks
The House Select Committee on the Chinese Communist Party released a scathing report Wednesday titled "DeepSeek Unmasked: Exposing the CCP's Latest Tool For Spying, Stealing, and Subverting U.S. Export Control Restrictions," alleging the Chinese AI company engages in covert data collection, censorship, and unauthorized technology acquisition.
"DeepSeek isn't just another AI app — it's a weapon in the Chinese Communist Party's arsenal, designed to spy on Americans, steal our technology, and subvert U.S. law," said Committee Chairman John Moolenaar (R-MI) House Select Committee on CCP1.
The bipartisan report, co-led by Ranking Member Raja Krishnamoorthi (D-IL), claims DeepSeek funnels American user data back to China through "back-end infrastructure connected to China Mobile," a company the committee describes as "military-related." Additionally, the report alleges DeepSeek's platform integrates "tracking tools" from other Chinese tech giants including ByteDance and Tencent SCMP2.
According to the committee, more than 85% of DeepSeek's responses are manipulated to suppress content related to democracy, Taiwan, Hong Kong, and human rights—without disclosure to users. The report also claims DeepSeek has ties to military research and strategic labs, including the Zhejiang Lab, which plays a crucial role in advancing China's scientific and technological capabilities.
Nvidia Connection Draws Congressional Scrutiny
In a direct challenge to one of America's most valuable tech companies, the committee has sent a formal letter to Nvidia demanding answers about the chipmaker's relationship with DeepSeek. According to the report, DeepSeek was reportedly developed using over 60,000 Nvidia chips, some of which may have been obtained in circumvention of US export controls.
"Public records show Nvidia CEO Jensen Huang directed the company to design a modified chip specifically to exploit regulatory loopholes after October 2023 restrictions," the committee claims House Select Committee on CCP1.
The committee's investigation comes as the Trump administration has imposed new restrictions on Nvidia's H20 chip exports to China, requiring special licensing for sales to the country, including Hong Kong and Macau. Nvidia disclosed on Tuesday that these restrictions will result in a substantial $5.5 billion charge related to inventory, purchase commitments, and reserves BBC3.
Jensen Huang's Beijing Visit Amid Escalating Tensions
In a striking diplomatic gesture, Nvidia CEO Jensen Huang arrived in Beijing on Thursday at the invitation of the China Council for the Promotion of International Trade, just days after the export restrictions were announced and the congressional report was released.
"China is a very important market for Nvidia," Huang told Chinese state media during his visit. "We hope to continue to cooperate with China," he added in a meeting with Ren Hongbin, head of the Chinese trade organization Reuters4.
The timing of Huang's visit underscores the complex position Nvidia finds itself in—navigating between US regulatory demands and its significant business interests in China. The H20 chip was specifically designed to comply with previous US export controls while still meeting the needs of Chinese customers, but the new restrictions have effectively closed that avenue.
Global Reactions: Market Impacts and Industry Concerns
The dual announcements of DeepSeek's designation and the new export controls sent Nvidia's shares plunging by nearly 7% on Wednesday, contributing to a broader 3.1% decline in the Nasdaq index BBC3.
The US restrictions have created significant uncertainty for Chinese internet companies, which were still anticipating H20 deliveries by the end of the year Reuters4. Several major Chinese tech firms had already placed orders for the chips, which were designed to power AI applications while complying with previous export control regulations.
Chinese officials have not directly commented on the DeepSeek allegations but have previously condemned US restrictions on technology exports as "economic coercion" aimed at suppressing China's technological development.
Expert Insights: Long-term Implications for AI Development
Technology analysts suggest the DeepSeek controversy and export restrictions mark a significant turning point in US-China technology competition, with potential long-term implications for global AI development.
"I expect the US and China AI semiconductor supply chains to be fully decoupled if restrictions stay in place," said Rui Ma, founder of the Tech Buzz China podcast. "It doesn't make any sense for any Chinese customer to be dependent on US chips, especially since there is an oversupply of data centers in China" BBC3.
Marc Einstein from Counterpoint Research suggests the restrictions may be part of a broader negotiating strategy. "While this is certainly a lot of money, this is something Nvidia can bear," he noted regarding the $5.5 billion impact. "I wouldn't be surprised to see some exemptions or changes made to tariff policy in the near future, given this not only impacts Nvidia but the entire US semiconductor ecosystem" BBC3.
The case highlights growing concerns about model distillation techniques, where one AI system can be used to train another, potentially allowing companies to circumvent export controls on underlying hardware by copying capabilities.
Future Implications: Escalating Tech Cold War
The congressional committee has recommended "swift action to expand export controls, improve export control enforcement, and address risks from PRC AI models" House Select Committee on CCP5. The committee also called for measures to "prevent and prepare for strategic surprise related to advanced AI."
Industry observers note that these developments are part of a broader pattern of increasing restrictions on technology transfers between the US and China. Chips remain a battleground in the US-China race for tech supremacy, with both countries viewing semiconductor leadership as crucial to national security and economic competitiveness.
As the world's two largest economies continue to vie for technological dominance, the question remains: Will these escalating tensions lead to a permanent bifurcation of the global technology ecosystem, or can diplomatic efforts like Jensen Huang's Beijing visit help preserve crucial channels of cooperation amid growing geopolitical competition?
