Washington takes aim at DeepSeek and its American chip supplier Nvidia

SAN FRANCISCO – Two months after DeepSeek, China’s artificial intelligence (AI) star,

rattled Washington and shook Wall Street

, US officials are taking steps to crack down on the Chinese start-up and its support from America’s leading chipmaker, Nvidia.

The Trump administration this week moved to restrict Nvidia’s sale of AI chips to China. It is also weighing penalties that would block DeepSeek from buying US 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 April 16, 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 US chipmaker knowingly provided DeepSeek with critical technology to develop AI, potentially in violation of US rules.

It is the first congressional investigation into Nvidia’s business. It comes as the Trump administration wrestles with how to carry out a Biden-era rule limiting the number of AI 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 AI, which would have wide-ranging implications for national security and geopolitics.

If China took the lead, it could more quickly use AI systems to design next-generation weapons such as autonomous missiles and drones. It could also persuade other countries to use its technology for their network of AI systems and infrastructure, weakening US influence across the world.

Mr Klon Kitchen, a senior fellow at the American Enterprise Institute who focuses on national security and technology, said the US’ strategy with AI had been to use its current lead in making AI chips and systems to persuade countries to ally with it.

The competition between Washington and Beijing for technological supremacy has scrambled the semiconductor business. In the wake of the Trump administration’s crackdown on chip sales to China this week, Nvidia and another chipmaker, Advanced Micro Devices (AMD), 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 April 16 that orders for its equipment had fallen short of expectations.

On April 16, shares of Nvidia, AMD and ASML fell more than 6 per cent.

Nvidia spokesman John Rizzo said the company followed the US government’s directions on what products it could sell and where it could sell them “to the letter”.

“Nvidia protects and enhances national security by creating US jobs and infrastructure, promoting US technology leadership, bringing billions of dollars of tax revenue to the US Treasury and alleviating the massive US trade deficit,” Mr Rizzo said.

In January, DeepSeek jolted the tech industry after the release of a new AI system, DeepSeek-V3, which it claimed to have trained for US$6 million (S$7.9 million), roughly a tenth of what US companies were spending.

The low-cost system challenged the industry’s consensus that bigger and better AI systems would be built by companies that spent the most on chips and data centres. Shares of Nvidia, which controls the AI chip market, plummeted 17 per cent in a single day, reducing its market valuation by US$600 billion.

“DeepSeek’s claims sent everyone through the roof because it showed we’re one moment away from the centrepiece of American policy being undermined,” Mr Kitchen said.

At a conference with industry executives in Washington in March, Commerce Secretary Howard Lutnick, who oversees US technology controls, said the Trump administration would pursue “a dramatic increase” in enforcement of US 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,” he 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 AI chips to China.

The limits mean Nvidia will need a licence to sell a chip it specially made for China, the H20. The company had developed that chip by modifying the abilities of a leading AI chip, the H100, to comply with the Biden administration’s performance thresholds for sales to China.

In February, the congressional committee on China began work on a 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 had been restricted from China.

The committee said that DeepSeek and other Chinese AI companies may have circumvented US restrictions on buying Nvidia chips by purchasing them through intermediaries in Singapore. It cited a report by Reuters in February that the Singapore 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 AI chips or more since 2020. It also asked for details about the companies that were expected to use those chips.

The committee has subpoena power and expects Nvidia to provide responses within two weeks, according to 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 AI chips could be shipped and require more disclosures about the customers using US technology.

Tech companies have protested against the rules, saying they threaten sales and US technology influence around the world. NYTIMES