The Hangzhou-based firm, which claimed in January that its AI models rivalled top US offerings at a fraction of the cost, is  under scrutiny for how it acquired and deployed high-end Nvidia chips supposedly blocked from export to China.

An official told Reuters that “DeepSeek has willingly provided and will likely continue to provide support to China’s military and intelligence operations.. this includes sharing user data with Beijing’s surveillance infrastructure."

Despite being under US sanctions, DeepSeek has got its paws on restricted Nvidia H100 chips, with some obtained via shell companies in Southeast Asia. US officials claim DeepSeek aimed to tap into data centres in the region to remotely operate the chips, one of the few legal workarounds not yet closed by the export rules.

Reuters reports DeepSeek appears more than 150 times in procurement filings from China’s People’s Liberation Army and its military-industrial complex. Privacy watchdogs will also be twitching, given that the outfit's infrastructure may transmit user data via China Mobile, a state-owned telecoms giant.

Nvidia has been distancing itself from the scandal, claiming it is effectively shut out of the China data centre market and that “DeepSeek used lawfully acquired H800 products, not H100.” Still, three sources say the company did get its hands on H100 units after the ban.

DeepSeek’s models, DeepSeek-V3 and R1, are reportedly being offered through services by Amazon, Microsoft and Google. While China’s foreign and commerce ministries declined to comment, the US has not ruled out further restrictions or sanctions.

Three men in Singapore were charged earlier this year in a case tied to the movement of Nvidia chips to DeepSeek. Malaysia’s trade ministry is now probing whether an unnamed Chinese firm used its servers for AI training in breach of local rules.

For now, DeepSeek remains off the US blacklist, but the whiff of military collaboration and regulatory evasion is hanging heavy.