The U.S. government announced that it was considering a crackdown on Chinese AI company DeepSeek while simultaneously turning up the heat on domestic chipmaker Nvidia as fears of China gaining a technological edge in AI continued to increase.
U.S. officials were considering taking steps to crack down on DeepSeek and its support from Nvidia just two months after the Chinese start-up rattled Washington and shook Wall Street.
DeepSeek shocked the AI industry in January with the release of DeepSeek-V3, a powerful open-source chatbot reportedly trained for just $6 million, a fraction of the cost usually incurred by U.S. competitors like OpenAI. Its performance and lower price raised alarm bells in Washington as officials feared that China may be accelerating its AI capabilities to outpace the United States.
This week, the Trump administration moved to restrict Nvidia’s sale of AI chips to China, and it is weighing penalties that will block DeepSeek from buying U.S. technology due to national security concerns. Trump’s government is also debating banning Americans from accessing DeepSeek services.
Polymarket data shows a 10% likelihood of the U.S. banning DeepSeek before July
Trump’s government recently hinted that DeepSeek is ripping OpenAI and undercutting U.S. AI. Trump said China was getting ‘no chips’ and ‘no service’ because it had ‘played copycat,’ now it was ‘payback time.’ However, PolyMarket data as of the time of publication showed that there was a 10% likelihood of DeepSeek being banned in the U.S. before July.
On April 16th, the U.S. Select Committee on the Chinese Communist Party also accused DeepSeek of ‘covertly funneling’ American user data to the CCP, manipulating information to align with CCP propaganda, and training its model using material unlawfully obtained from U.S. AI models. Committee Chairman John Moolenaar (R-MI) said, ‘Advanced Nvidia chips should never have ended up in CCP hands.’
The Committee’s report stated that it had formally contacted Nvidia demanding answers about sales to China and Southeast Asia to examine how its chips ended up powering DeepSeek’s AI models—despite U.S. export restrictions on Nvidia’s most advanced chips from 2022. However, Nvidia claimed it had followed all directives from the Federal government regarding what American businesses could sell and where.
“The technology industry supports America when it exports to well-known companies worldwide — if the government felt otherwise, it would instruct us.”
U.S. and China’s battle for AI supremacy scrambles the tech sector
According to the New York Times, in the wake of the Trump administration’s crackdown on chip sales to China this week, Nvidia and Advanced Micro Devices said they would lose billions of dollars in sales. Nvidia warned on April 16th that it would take a $5.5 billion hit after the U.S. government limited exports of its H20 AI chip to China, which is a key market for one of its most popular chips.
ASML Holding–the Dutch company whose machines are essential for manufacturing the most advanced semiconductors–said on April 16th that orders for its equipment had fallen short of expectations. On Wednesday, Google Finance data showed that shares of Nvidia, AMD, and ASML fell more than 6% following announcements of the alleged DeepSeek ban.
Klon Kitchen, a senior fellow at the American Enterprise Institute, said the U.S. strategy with AI had been to use its current lead in making AI chips and systems to persuade countries to ally with it. Additionally, a group of 21 state attorneys general had previously urged Congress to pass a bill to bar government devices from downloading and using DeepSeek AI on government devices.
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