DeepSeek, a Hangzhou-based artificial intelligence firm, has access to large volumes of Nvidia’s high-end graphics processing units (GPUs) and supports China’s military and intelligence operations, according to a United States official.
An unnamed senior State Department official told Reuters in an interview that DeepSeek sought to use Southeast Asian shell companies to obtain high-end Nvidia chips, including H100 chips, which cannot be shipped to China under US rules.
The report said the US official’s comment showed that DeepSeek’s fast-growing AI capabilities were exaggerated, as the company still relied heavily on US technology.
The official warned that DeepSeek had provided user information to the Chinese government but had declined to comment on whether the US would implement further export controls or sanctions against DeepSeek.
“DeepSeek has willingly provided and will likely continue to support China’s military and intelligence operations,” said the official. “This effort goes above and beyond open-source access to DeepSeek’s AI models.”
An Nvidia spokesman told Reuters that the company’s review indicates that DeepSeek used “lawfully acquired” H800 products, not H100.
According to the academic papers published by DeepSeek’s researchers, the company used 2,048 Nvidia H800 chips to train its DeepSeek-V3 large language model (LLM). DeepSeek-V3 required 2.788 million H800 GPU hours for its complete training, meaning the total training time was about 56.7 days.
DeepSeek also claimed that the training cost for its AI model was only US$5.58 million. By comparison, Meta spent US$500 million to train its Llama 3.1.
A group of DeepSeek researchers said in a paper on January 22 that DeepSeek-R1’s training used the “distilled data” from Alibaba’s Tongyi Qianwen (Qwen) and Llama. The “distillation” method uses outputs from a larger AI model to train and improve a smaller one.
However, US officials, including the incumbent Commerce Secretary Howard Lutnick, said DeepSeek could create its AI models “dirt cheap” by purchasing many Nvidia chips and stealing data from Meta’s open platform.
In October 2022, the Biden administration banned the exports of Nvidia’s A100 and H100 chips to China. In October 2023, it also banned the exports of the A800 and H800 chips to China.
Many commentators have said that these export controls have a loophole that allows Chinese firms to access American high-end chips through third countries.
In January this year, Alexandr Wang, chief executive of the US-based Scale AI, told CNBC that DeepSeek has 50,000 units of H100 chips, the most advanced Nvidia chips on the market. Wang did not provide any evidence or more details.
“We believe they have access to around 50,000 Hopper GPUs, which is not the same as 50,000 H100, as some have claimed,” a team of Semianalysis.com analysts led by Dylan Ratel wrote in a report on January 31. “We believe DeepSeek has access to around 10,000 H800s and about 10,000 H100s. Furthermore, they have orders for many more H20’s.”
The team said DeepSeek’s total server CapEx is about US$1.6 billion, plus an operational cost of US$944 million.
On April 16, the US House Select Committee on the Chinese Communist Party (CCP) opened an investigation into Nvidia’s sales across Asia after issuing a report claiming that DeepSeek had illicitly accessed the firm’s chips to train its AI models.
The latest Reuters report, citing three unnamed sources, said DeepSeek could still procure the H100 chips after the US banned Nvidia from selling them to China. The sources said DeepSeek obtained far below 50,000 units of Nvidia’s high-end chips.
Singapore’s strong action
Last December, The Information reported that Nvidia had asked Super Micro and Dell to audit their Southeast Asian customers to verify that they still possessed the Nvidia-powered servers they had bought.
After DeepSeek released its low-cost DeepSeek-R1 model on January 20 this year, the Trump administration reportedly had started probing whether DeepSeek bought Nvidia’s advanced chips through Singapore.
“Nvidia has stated that there is no reason to believe that DeepSeek obtained any export-controlled products from Singapore,” Singapore’s Ministry of Trade and Industry said in a statement on February 1.
“We expect US companies, like Nvidia, to comply with US export controls and our domestic legislation,” it said. “Our customs and law enforcement agencies will continue to work closely with their US counterparts.”
In February, Singapore charged three men with fraud for allegedly helping ship Nvidia’s high-end chips to DeepSeek in China in 2024. The accused include two Singaporeans, Aaron Woon Guo Jie, 41, and Alan Wei Zhaolun, 49.
According to the court papers, the duo committed fraud by falsely declaring to US-based companies Super Micro Computer and Dell Technologies that the servers they purchased, possibly containing Nvidia chips under US export controls, would not be sent to unauthorized recipients. But eventually, the accused shipped these servers to Malaysia and potentially elsewhere.
The third person charged was Chinese national Li Ming, 51, who claimed in 2023 that the imported items would be used by the Singapore-registered company Luxuriate Your Life Pte Ltd.
The three defendants, if convicted, could face penalties of a jail term of up to 20 years or a fine, or both.
Media reports said Wei, a naturalized Singaporean, spent more than two decades building his cloud solution businesses in Asia and owns or helps to manage at least 15 firms, including Aperia Cloud Services and A-Speed Infotech Pte.
In March this year, Exsim, a Malaysian property and technology firm, said it mutually terminated its contract with Aperia Cloud Services for the Exsim Hyperscale Data Centre in Bukit Jalil and will source equipment from a “Japanese Fortune 500 company.”
On May 13 this year, the Trump administration issued guidance on protecting supply chains against diversion tactics. It said China used advanced US chips as part of its “military modernization efforts to improve the speed and accuracy of its military decision making, planning, and logistics, as well as of its autonomous military systems, such as those used for cognitive electronic warfare, radar, signals intelligence, and jamming.”
It now requires chip makers to follow a set of “know your customer” (KYC) rules and raise red flags for possible transshipment of US high-end chips to China.
The Financial Times reported on June 9 that the Trump administration might ease restrictions on selling chips to China in exchange for the country’s key minerals. However, a meeting between US and Chinese officials in London on June 9-10 seemed to have focused on other things, such as allowing Chinese students to study in the US.
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