*

Organized AI chip smuggling to China has been tracked out

of

countries including Malaysia, source says

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Nvidia ( NVDA ) insists its partners comply with all applicable

laws

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Singapore says it has always upheld rule of law

(Updates story dated Jan. 30 with response from Singapore

government on Feb. 1 in paragraph 8 to 10)

By Karen Freifeld

Jan 30 (Reuters) - The U.S. Commerce Department is

looking into whether DeepSeek - the Chinese company whose AI

model's performance rocked the tech world - has been using U.S.

chips that are not allowed to be shipped to China, a person

familiar with the matter said.

China's DeepSeek last week launched a free assistant it says

uses less data at a fraction of the cost of U.S. models. Within

days, it became the most downloaded app in Apple's App Store and

stirred concerns about United States' lead in AI, sparking a

rout that wiped around $1 trillion off U.S. technology stocks.

Current restrictions on Nvidia ( NVDA ) artificial

intelligence processors are meant to stop its most sophisticated

chips from reaching China.

Organized AI chip smuggling to China has been tracked out of

countries including Malaysia, Singapore and the United Arab

Emirates, the source said.

The Commerce Department and DeepSeek did not immediately

return requests for comment.

An Nvidia ( NVDA ) spokesperson said many of its customers have

business entities in Singapore and use those entities for

products destined for the U.S. and the west.

"We insist that our partners comply with all applicable

laws, and if we receive any information to the contrary, act

accordingly," Nvidia ( NVDA ) said.

In a statement on Saturday, Singapore's trade ministry cited

Nvidia's ( NVDA ) comment saying there is no reason to believe that

DeepSeek obtained any export-controlled products from Singapore.

The ministry did not confirm whether DeepSeek had gained

access to Nvidia ( NVDA ) chips that were subject to U.S. export controls

via intermediaries in Singapore, but said it has always upheld

the rule of law and acted decisively and firmly against

individuals and companies that flout the rules.

"We expect U.S. companies, like Nvidia ( NVDA ), to comply with U.S.

export controls and our domestic legislation," it said. "Our

customs and law enforcement agencies will continue to work

closely with their U.S. counterparts."

DeepSeek has said it used Nvidia's ( NVDA ) H800 chips, which it

could have legally purchased in 2023. Reuters could not

determine whether DeepSeek has used other controlled chips that

are not allowed to be shipped to China.

DeepSeek also apparently has Nvidia's ( NVDA ) less powerful H20s,

which can still lawfully be shipped to China. The U.S.

considered controlling them under the Biden administration and

newly appointed Trump officials are discussing that as well.

The CEO of AI company Anthropic, Dario Amodei, said earlier

this week, "it appears that a substantial fraction of DeepSeek's

AI chip fleet consists of chips that haven't been banned (but

should be), chips that were shipped before they were banned; and

some that seem very likely to have been smuggled."

The U.S. has put in place a raft of restrictions barring

exports of AI chips to China and plans to cap their shipments to

a host of other countries.