America may have yet again failed to solve its 'Nvidia problem in China', and what makes it dangerous for the country

The US may once again face challenges in enforcing restrictions on the export of advanced artificial intelligence (AI) chips to China. Despite export restrictions intended to prevent such use, US officials have confirmed to Reuters that Chinese startup DeepSeek has trained a new AI model on Nvidia's Blackwell chips. The US government is now concerned about the implications of transferring advanced computing technology across international borders and enforcement gaps. A former high-ranking official in the Trump administration told Reuters that a Chinese AI startup, DeepSeek, is set to launch its next AI model next week and that it was trained on Nvidia’s Blackwell chips. This violates US export controls intended to restrict China’s use of highly advanced AI chips.

The US believes DeepSeek may remove technical indicators that could reveal the use of American AI chips, the official claimed, adding that the Blackwell systems are likely clustered at the company’s data centre in Inner Mongolia, an autonomous region of China. However, the official declined to disclose how the US government obtained the information or how DeepSeek acquired the chips, but stressed that the country’s current US policy is, “We're not shipping Blackwells to China.”

The official declined to comment on whether the latest developments would influence the administration’s decision on allowing DeepSeek to purchase H200 chips. In a Reuters report, US officials are quoted as saying that a Chinese AI startup, DeepSeek, has trained a new AI model using Nvidia’s Blackwell chips. This move comes despite export controls that are meant to limit such use. The government is now indicating renewed concerns about the possibility of gaps in enforcement and the implications of state-of-the-art computing technology crossing borders.

What China said about DeepSeek’s alleged use of Nvidia’s advanced chips

In a statement to Reuters, the Chinese embassy in Washington said Beijing opposes “drawing ideological lines, overstretching the concept of national security, expansive use of export controls and politicising economic, trade, and technological issues."

The US government’s confirmation that DeepSeek may have obtained restricted chips, first reported by Reuters, is likely to deepen divisions among Washington policymakers as officials continue to debate how to regulate China’s access to advanced American AI semiconductor technology.

White House AI Czar David Sacks and Nvidia CEO Jensen Huang have argued that allowing shipments of advanced AI chips to China could reduce incentives for domestic competitors such as Huawei to accelerate efforts to match Nvidia’s and AMD's technology.

However, critics warn that such chips could be redirected from commercial applications to military use, potentially strengthening China’s defence capabilities and affecting US leadership in AI.

“This shows why exporting any AI chips to China is so dangerous. Given China's leading AI companies are brazenly violating U.S. export controls, we obviously cannot expect that they will comply with U.S. conditions that would prohibit them from using chips to support the Chinese military,” Chris McGuire, who served as a White House National Security Council official under former President Joe Biden, told Reuters.

Currently, Nvidia's Blackwell chips cannot be shipped to China due to US export regulations administered by the Commerce Department. US President Donald Trump changed his mind after implying in August that he might allow Nvidia to sell a scaled-down Blackwell processor in China, saying that the company's most advanced chips should only be sold to US companies.

Lawmakers who wanted more stringent regulations criticised Trump's December 2025 decision to allow Chinese companies to purchase Nvidia's second-best chips, the H200. However, the chips have not yet been delivered due to safeguard requirements related to approval.

"Chinese AI companies' reliance on smuggled Blackwells underscores their massive shortfall of domestically produced AI chips and why approvals of H200 chips would represent a lifeline," said Saif Khan, who previously served as director of technology and national security at the White House’s National Security Council under former President Joe Biden, told Reuters.

Hangzhou-based DeepSeek drew attention last year after releasing AI models that competed with offerings from US companies, adding to concerns in Washington about China’s progress in AI despite export restrictions.

The Information had earlier reported that DeepSeek smuggled chips into China to train its next model, while Reuters is now reporting that the US government has confirmed the chips were used for that purpose at the company’s facility in Inner Mongolia.