Jeffrey A. Newman
DeepSeek, China’s fledgling artificial intelligence company that sent a shockwave through the stock markets yesterday to the tune of $1 trillion in losses, is the topic of headlines today and that will continue. The Wall Street Journal makes an interesting point in one of their several front page articles on the topic today. That is that is that a gaping hole in American export control laws and regulations allowed DeepSeek to get access to advanced semiconductor chips that allowed them to create a fast and economic articificial intelligence program that is outshining what US companies have created.
In addition, Deepseek took a novel approach as well stated in the WSJ article but basically uses a “mixture of experts” to master details on any topic. This approach requires less time and power before any question is asked and uses more time and power when asnwering.
The issue relating to the weakness in our export controls related to controls put in place in 2022 limiting the kind of computer chips that could be sold to China relating to the speed at which data can be transferred. Nvidia developed an entirely new product fior China that complied with this restriction but which still held its high power performance in other ways. Apprently this was almost as powerful as Nvidia’s best chip at that time. In 2023 the government tightened the rulkes but left open Nvidia’s new chip which could still be sold to China. In a paper referenced by the WSJ today, DeepSeek said it used 2,048 of these chips to train one of its AI models.
Since the rules were revised in 2023, Nvidia developed a new export compliant chip for China that is less powerful than the H800. It will be very difficult for the U.S. to slow China’s progress in the semiconductor chip AI arena. stay tuned for more on this topic. In addition, the MIT Technology Review has a detailed article written by Caiwei Chen as to HOW A TOP AI MODEL OVERCAME US SANCTIONS. This article points out that before the anticipated U.S. sanctions, Liang Wenfang, who founded the hedge fund that spawned DeepSeek, smartly acquired a stockpile of Nvidia A100 chips, the type now banned from export to China. It is estimated that they have over 10,000 units in stock and one other source estimnates 50,000 units. The MIT Technology Review is a superbly researched and written article which will hopefully inspire US companies to try new ways of AI development which is energy efficient, which addresses another
Jeff Newman JD MBA, represents whistleblowers nationwide relating to customs and tariff fraud concerning imported Chinese goods as well as corporate whistleblowers in major claims under the False Claims Act (Qui Tam), and SEC, CFTC and FINCEN whistleblower programs. He can be reached at Jeff@JeffNewmanLaw.com or at 617-823-3217