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US officials are deep into an investigation to find out if Chinese AI startup DeepSeek found a backdoor route to Nvidia’s high-end chips through Singapore, evading American export bans, according to a report from Bloomberg.

The chips are banned for sale directly to China, but America says DeepSeek may have secured them through third-party distributors in the Southeast Asian hub. The FBI and White House are leading the charge, reportedly using intel from anonymous sources tied to the investigation.

The investigation comes just days after DeepSeek’s launch of its AI chatbot, R1, earlier this month. The bot shocked industry veterans with its powerful human-like reasoning and efficiency. Analysts say it rivals, if not threatens, AI tools built by US giants like OpenAI.

But many suspect that R1’s development wasn’t all homegrown. Rivals, most especially OpenAI, believe the Chinese company relied on Western tech, possibly Nvidia’s powerful semiconductors, to push R1’s performance through the roof.

FBI focuses on Nvidia’s H800 chips in DeepSeek probe

Investigators are zeroing in on Nvidia’s H800 chip, a less-powerful version designed specifically for the Chinese market after the US imposed its first export restrictions in 2022.

According to documents reportedly reviewed by the officials, DeepSeek’s V3 AI model—released just last month—was trained using a whopping 2,048 H800 chips. The V3 model directly laid the foundation for R1’s chatbot capabilities, making Nvidia’s hardware critical to DeepSeek’s AI success.

In October 2023, US authorities expanded the ban, blocking even the H800 chips from entering China. Nvidia quickly pivoted by creating another stripped-down version called the H20 chip, which complied with new restrictions but had reduced performance.

Now the Trump administration is discussing extending the ban to cover H20 chips, with Commerce Secretary nominee Howard Lutnick making it clear that he’s more than ready to tighten the screws.

Source: Bloomberg

“Nvidia’s chips, which they bought tons of, and they found their ways around it, drive their DeepSeek model,” Howard said during his Senate confirmation hearing on Wednesday. “If they’re going to compete with us, fine—but stop using our tools to do it.” He promised aggressive action, adding that the current loopholes in export enforcement “have got to end.”

The AI boom has driven Nvidia to the top of the chip-making game, but new restrictions could carve away significant chunks of its revenue. The company issued a statement claiming its partners are required to follow all export laws and that any violations will be addressed “swiftly.”

Singapore under the microscope as chip revenue raises questions

Singapore accounts for about 20% of Nvidia’s reported revenue, but the report claims most of that revenue didn’t come from chips physically shipped to Singapore. According to Nvidia’s own filings, much of it involves orders placed by Singaporean entities but destined for other countries, some of which could include China.

“We track ‘bill to’ locations, not ‘ship to’ locations,” Nvidia clarified in response to questions about the investigation. This distinction means Singapore-based buyers could place large orders for chips meant for delivery elsewhere. The FBI wants to know if intermediaries helped divert these orders into Chinese hands.

US Representatives John Moolenaar and Raja Krishnamoorthi sent a letter on Tuesday to National Security Advisor Mike Waltz, urging the administration to slap stricter licensing requirements on chip exports to Singapore.

“Countries like Singapore should be subject to strict licensing requirements absent a willingness to crack down on shipments to China,” the lawmakers wrote.

While Singapore wasn’t included in the initial geographic scope of US chip restrictions, investigators are now exploring how that loophole may have given Chinese companies like DeepSeek an advantage.

Under current rules, large shipments to Singapore require a license, but smaller shipments (less than 1,700 chips) only need notification. The lack of tighter controls has created an opening that many in Washington are eager to close.

Nvidia stock fell nearly 7% following the announcement of the US probe, extending a rocky week that also saw declines for Microsoft, Oracle, and Alphabet. In total, tech companies lost almost $1 trillion in market value as investors panicked over China’s growing AI capabilities.

Microsoft and OpenAI are doing their own investigation into whether DeepSeek accessed OpenAI’s data without permission. DeepSeek’s claim that it developed its AI models at a fraction of the cost of US competitors has brought suspicions that it may have exploited Western-developed tools or datasets.

Microsoft is particularly concerned that DeepSeek’s progress could weaken its long-term dominance in the AI market.

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