Nvidia denies DeepSeek is using smuggled Blackwell chips despite market impact

In January 2025, a Chinese artificial intelligence startup called DeepSeek released a model that sent shockwaves through global markets. The R1 model worked remarkably well—and it had been built at a fraction of what American competitors spent. Within days, billions of dollars evaporated from US stock valuations as investors grappled with the implications: China was advancing faster in AI than many had assumed possible. The question that followed was immediate and uncomfortable: how had DeepSeek done it? Where had the computing power come from?

This week, The Information published a report suggesting an answer. According to the outlet, DeepSeek had acquired smuggled Nvidia Blackwell chips—among the most powerful processors Nvidia makes—and was using them to train its next generation of models. The allegation carried weight because Blackwell chips are subject to strict US export controls. Washington has banned their sale to China as part of a deliberate strategy to preserve American dominance in the AI race. If the report was true, it would mean DeepSeek had circumvented those restrictions through an elaborate smuggling operation.

Nvidia moved quickly to push back. A company spokesperson told CNBC that the claims seemed implausible and that Nvidia had found no evidence to support them. "We haven't seen any substantiation or received tips of 'phantom data centers' constructed to deceive us and our OEM partners, then deconstructed, smuggled and reconstructed somewhere else," the spokesperson said. The company acknowledged the scenario was far-fetched but added that it takes any credible tip about chip diversion seriously and investigates leads when they surface.

The denial matters because Nvidia's relationship with China has become a flashpoint in Washington. Blackwell chips are foundational to the AI boom—they power everything from large language models to the data centers that train them. Control over who gets access to these chips has become a matter of national security policy, not just commercial competition. The stakes are high enough that they have drawn presidential attention.

This week, President Donald Trump announced a significant shift in that policy. He said Nvidia would be permitted to sell its H200 chips to approved customers in China, provided the US government receives 25 percent of the revenue from those sales. Trump framed the move as a way to support American workers and manufacturers while maintaining national security safeguards. He claimed to have discussed the arrangement with Chinese President Xi Jinping, who he said responded positively. The announcement also signaled that the same approach would apply to other American chipmakers like AMD and Intel.

The policy reversal highlights the tension between commercial interests and geopolitical caution. The Biden administration had pushed companies to develop degraded versions of their chips for export, a strategy Trump criticized as wasteful and counterproductive. His administration, he suggested, would take a different approach: allow sales under conditions that protect American interests while keeping the US ahead in AI.

What remains unclear is whether DeepSeek actually obtained Blackwell chips through smuggling, or whether the company achieved its breakthrough through other means—perhaps by using older, less restricted processors more efficiently, or by developing its own chip designs. Nvidia's denial suggests the company sees no hard evidence of diversion. But the fact that the question is being asked at all underscores how central chip access has become to the US-China competition in artificial intelligence, and how quickly the rules governing that competition can shift.