The U.S. Department of Commerce has launched an investigation into whether Chinese artificial intelligence company DeepSeek illegally obtained advanced Nvidia semiconductor chips through Singaporean intermediaries, bypassing strict export controls aimed at curbing China’s access to cutting-edge technology.
According to sources familiar with the matter, the probe focuses on potential violations of U.S. export restrictions imposed in 2022, which barred Nvidia and other chipmakers from selling high-performance AI accelerators, such as the A100 and H100 series, to Chinese firms over fears they could be used for military or surveillance purposes. Nvidia had since developed modified, compliant chips for the Chinese market, but concerns persist that restricted hardware continues to reach entities in China through third-party channels.
Bloomberg reported that U.S. authorities are scrutinizing shipments of Nvidia chips to Singapore-based entities suspected of acting as intermediaries for DeepSeek, a Beijing-based AI startup specializing in large language models and machine learning. While Singapore is not subject to U.S. export bans, reselling restricted technology to Chinese companies without proper authorization violates American trade laws.
DeepSeek, founded in 2023, has rapidly emerged as a contender in China’s fiercely competitive AI sector, with its models reportedly rivaling those of industry leaders like OpenAI. The company’s sudden access to advanced computing resources raised red flags among U.S. regulators, prompting the ongoing review.
Broader Implications for Tech Trade
The investigation underscores escalating tensions in the U.S.-China tech war, with Washington tightening export controls to stifle Beijing’s AI ambitions. Nvidia, which holds over 90% of the AI chip market, has faced increasing scrutiny over compliance. In a statement, the company said it “adheres to all applicable export regulations,” while DeepSeek declined to comment.
If violations are confirmed, penalties could include fines, blacklisting of involved entities, or criminal charges. Analysts suggest the case may prompt stricter enforcement of “know-your-customer” rules for chip distributors globally. “Singapore’s role as a regional tech hub makes it a potential loophole,” said Paul Triolo, a tech policy expert at Albright Stonebridge Group. “This probe signals that the U.S. is tracking not just direct exports but multi-node supply chains.”
Market Reactions and Ongoing Scrutiny
News of the investigation sent Nvidia shares down 2% in pre-market trading, reflecting investor anxiety over regulatory risks. Meanwhile, Chinese AI stocks rallied, driven by speculation that domestic firms might accelerate efforts to develop homegrown alternatives.
The Commerce Department has not disclosed a timeline for the probe’s conclusion, but the case highlights the challenges of enforcing export controls in a globalized tech ecosystem. Previous incidents, including Huawei’s alleged use of shell companies to acquire banned components, have led to similar crackdowns.
As the U.S. and China vie for AI supremacy, this investigation underscores the geopolitical stakes—and the lengths to which companies may go to secure critical technology. For now, the world’s two largest economies remain locked in a high-tech standoff with no easy resolution in sight.
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