The US Commerce Department is investigating whether DeepSeek, a Chinese AI company, has been using US-made chips that are restricted from being shipped to China. DeepSeek recently launched a free AI assistant that quickly became the most downloaded app in the Apple App Store, sparking concerns over China's growing AI capabilities and causing a $1 trillion drop in US tech stocks.

Current US restrictions limit the export of Nvidia's advanced AI processors to China, but there have been reports of smuggling operations involving AI chips from countries like Malaysia, Singapore, and the UAE. DeepSeek claims to use Nvidia's H800 chips, which it could legally purchase in 2023, along with H20s, which are not banned but could face future restrictions.

Nvidia maintains that it ensures compliance with export laws, and the US government is keeping a close eye on potential violations. AI company Anthropic's CEO has suggested that DeepSeek’s chip fleet may include banned or smuggled chips.