In April 2023, Liang Wenfeng, a millennial entrepreneur from Guangdong, China, founded DeepSeek, an artificial intelligence (AI) startup based in Hangzhou. Despite a modest budget of less than $6 million, DeepSeek developed an AI model comparable to OpenAI’s ChatGPT, a feat that has drawn significant attention and skepticism.
The U.S. government imposed export controls on high-end chips to China, including Nvidia’s A100 and H100 models, in September 2022. In response, Nvidia developed the A800 and H800 chips to comply with these regulations. However, in October 2024, the U.S. extended the ban to include these modified versions as well.
Originally, DeepSeek publicly reported that Nvidia’s export-controlled H100s and H800s were not used in its AI model. DeepSeek originally stated that its founder had stockpiled thousands of A100s to train DeepSeek, and that the H100s and H800s were not needed because DeepSeek was much more efficient than other models.
However, DeepSeek’s performance raised eyebrows about the hardware that was actually used. In a CNN interview with Scale AI, its CEO commented that he was personally aware that DeepSeek is using about 50,000 H100s. When a Twitter-X user asked Elon Musk if DeepSeek was using export-controlled hardware, Must replied, “Obviously.”
DeepSeek’s rapid advancement in AI technology has raised questions about how the company circumvented U.S. export controls. Some speculate that DeepSeek may have accessed advanced Nvidia-equipped data centers in China, possibly through gray market channels. Critics argue that current export controls have been too lenient, allowing Chinese firms to acquire cutting-edge chips despite the bans.
Despite those restrictions, reports indicate that Chinese entities have acquired banned Nvidia chips through gray markets. Smugglers have transported these high-performance GPUs into China via third-party countries like Singapore. For instance, a 26-year-old Chinese student smuggled Nvidia AI processors from Singapore to China by packing six Nvidia compute cards into his personal luggage. Export-controlled Nvidia processors are listed for sale on Alibaba.
In response, the U.S. government is considering new measures to prevent China from obtaining advanced AI chips through third countries such as Singapore and Malaysia. These developments highlight the challenges in enforcing export controls and the ongoing global competition in AI technology.
DeepSeek’s achievements underscore the difficulty of regulating advanced technologies and the lengths to which companies may go to access needed hardware. As the U.S. government contemplates stricter enforcement of export controls, the international community closely watches the evolving landscape of AI development and the measures employed to maintain technological advantages.
