The most recent US scrutiny of the export of high-end AI chips, those of NVIDIA in particular, has gathered momentum with the rise of the Chinese firm DeepSeek. This has created intense fears of loopholes through which such high-end chips are finding their way to China despite stringent export controls.
The DeepSeek Scandal
DeepSeek, a Chinese artificial intelligence firm, has used NVIDIA’s technology to create sophisticated AI models that have become popular in the market. With computation power worth more than $1.6 billion, including about 10,000 units of NVIDIA’s “China-specific” H800 GPUs and the same number of the more powerful H100 chips, DeepSeek’s strength has created fears that US export controls cannot halt China’s technology boom.
The Biden administration had already prohibited the export of H100 chips to China in 2022, prompting NVIDIA to devise alternative models such as the H800 and H20, which are also in the crosshairs now for potential restrictions.
Singapore’s Involvement in the Supply Chain
Singapore has also found itself at the center of this probe due to a whopping 740% boost in NVIDIA’s sales to the country since DeepSeek was established. This spurt is of particular interest considering Singapore’s lack of participation in the AI race, which implies that it could be being used as a transit point for chips to China. US authorities are probing whether the chips were exported to Chinese firms through Singapore, which can have disastrous implications if true.
The relatively modest number of Singapore data centers—just 99—stands in stark contrast to the number of chips China supposedly imported from the country, and has raised questions about possible smuggling operations and the efficacy of existing export controls. NVIDIA has admitted that billing points and end-user points can be different, suggesting an acknowledgment of possible loopholes that can be used to evade U.S. restrictions.
DeepSeek, NVIDIA, and the Future of AI Regulation
The DeepSeek case highlights a broader challenge for U.S. policymakers as they seek to preserve technological superiority while preventing key technologies from falling into the hands of competitors.
The speed with which Chinese companies have made progress using NVIDIA technology highlights the limitations of export controls as an end-in-themselves policy.
U.S. lawmakers are now calling for tighter restrictions on AI chip exports in fear that existing policies are not enough to keep strategic competitors from acquiring advanced technology.
That includes demands for full investigations into how companies like DeepSeek are accessing these technologies and whether they are evading U.S. laws through third-party countries like Singapore.
As the U.S. government readies to open a formal investigation into NVIDIA’s sales practices and what they mean for national security, the stakes are high not just for NVIDIA—whose 20% of revenues from AI could be lost—but for the global AI market as a whole.
If major loopholes in export controls are discovered to exist, it could prompt a rethinking of how technology is regulated around the world and further complicate U.S.-China relations in the tech space.
As this scenario plays out, there remains a feeling that although export controls can be used as a short-term measure, they might not be a solution to the fast-paced technological progress being achieved by nations such as China through innovative technologies and possible evasive measures. The result of such an inquiry could reshape the future of AI research and global trade in technology for the next few decades.
