June 24, 2025— Chinese artificial intelligence firm DeepSeek is actively supporting China’s military and intelligence operations, according to a senior U.S. State Department official, marking a stark escalation in Washington’s scrutiny of China’s AI ambitions.
The official, speaking on condition of anonymity to discuss classified information, told Reuters that the Hangzhou-based company has shared user data with Chinese authorities and leveraged a network of shell companies in Southeast Asia to sidestep U.S. export controls on advanced semiconductors. The revelations deepen concerns about Beijing’s use of cutting-edge technology for defense and surveillance and may further strain already tense U.S.-China tech relations.
“We understand that DeepSeek has willingly provided and will likely continue to provide support to China’s military and intelligence operations,” the official said. “This effort goes above and beyond open-source access to DeepSeek’s AI models.”
DeepSeek, founded in 2022, rose to global prominence earlier this year after claiming that its AI models—particularly DeepSeek-V3 and DeepSeek-R1—rivaled or outperformed industry leaders like OpenAI and Meta at a fraction of the cost. The firm said it spent only $5.58 million on computing power to train these models, a claim met with skepticism by experts.
Now, Washington officials are questioning not just the origin of DeepSeek’s technical prowess but also the legality of its chip acquisitions and its data practices. The company has not responded to Reuters’ repeated requests for comment.
Advanced Chips via Workarounds
Despite U.S. restrictions imposed in 2022 on the export of Nvidia’s high-performance AI chips—particularly the H100 series—to China, DeepSeek allegedly managed to gain access to these banned chips in large quantities.
“DeepSeek sought to use shell companies in Southeast Asia to evade export controls, and DeepSeek is seeking to access data centers in Southeast Asia to remotely access U.S. chips,” the U.S. official said.
The same official added that DeepSeek now has access to “large volumes” of Nvidia’s H100 chips, a claim that contrasts with Nvidia’s public statements. The chipmaker has emphasized compliance with export laws, stating it no longer serves China’s data center market, which is now dominated by domestic competitors such as Huawei.
“Our review indicates that DeepSeek used lawfully acquired H800 products, not H100,” an Nvidia spokesperson told Reuters. The H800 chips, developed by Nvidia to meet less stringent export criteria, offer lower performance than the restricted H100s.
Adding to the intrigue, authorities in Singapore in February charged three men with fraud in a case linked by local media to the unauthorized shipment of Nvidia’s advanced chips to DeepSeek. The U.S. has not confirmed whether this is directly tied to DeepSeek’s alleged access to the banned hardware.
Military Ties and Privacy Concerns
DeepSeek’s connections to China’s military are becoming increasingly difficult to ignore. According to the U.S. official, the AI firm appears over 150 times in procurement records for the People’s Liberation Army (PLA) and associated research institutions.
Reuters was unable to independently verify the procurement data, but the breadth of mentions suggests sustained engagement with China’s defense apparatus. The company has reportedly provided technical services to PLA-affiliated labs, raising alarms in Washington over its dual-use capabilities.
Equally concerning to U.S. lawmakers are allegations that DeepSeek transmits data from American users to Chinese servers via backend infrastructure connected to China Mobile, a state-owned telecom giant. Chinese law mandates that domestic firms comply with data-sharing requests from the government, but the suggestion that DeepSeek is proactively funneling sensitive data has intensified national security fears.
At the same time, DeepSeek continues to benefit from U.S.-based infrastructure. Tech giants such as Amazon Web Services, Microsoft Azure, and Google Cloud currently offer DeepSeek’s services to customers, potentially giving the Chinese company a significant foothold in international markets.
Whether U.S. cloud providers were aware of DeepSeek’s activities remains unclear.
Strategic Silence and Future Action
Despite the growing body of evidence, the Biden administration has not yet placed DeepSeek on any trade blacklist, such as the U.S. Entity List, which would formally restrict the company’s access to American technology and partnerships. The State Department declined to confirm whether sanctions or additional export restrictions are being considered.
“We do not support parties that have violated U.S. export controls or are on the U.S. entity lists,” Nvidia said in a prepared statement.
Malaysia’s Ministry of International Trade and Industry confirmed last week that it is investigating whether an unnamed Chinese firm was using Nvidia-powered servers in violation of local or international regulations. Sources familiar with the case say the inquiry may be linked to DeepSeek.
The revelations surrounding DeepSeek arrive amid an ongoing U.S.-China tech war, in which semiconductors, AI, and quantum computing have emerged as key battlegrounds. While China seeks technological self-reliance, Washington is moving swiftly to contain the export of sensitive technologies that could fuel adversarial military advancements.
As pressure mounts, the fate of DeepSeek and its global operations may rest on how swiftly and decisively U.S. authorities act—and whether America’s allies will follow suit. Until then, one of China’s most ambitious AI startups remains in legal and geopolitical limbo.
