DeepSeek develops its own AI chip to reduce its dependence on Nvidia and Huawei

Editorial note: the link included in the newsletter carried the brief headline "China is looking at curbing overseas access to its top AI models," but the Reuters article actually downloaded from that URL deals with a different, more specific topic: DeepSeek's development of its own artificial intelligence chip. Reuters mentions in passing, among the related articles, a piece titled "China weighs silicon curtain around sought-after AI models," which is probably the one the newsletter summary had in mind; however, that is not the piece whose content was retrieved. In the interest of journalistic honesty, this analysis is based exclusively on the text actually obtained—that is, the exclusive report on DeepSeek's chip.

According to three sources consulted by Reuters who asked not to be identified because the information is not public, DeepSeek, the Hangzhou-based Chinese start-up that became famous worldwide for its low-cost AI models, is developing its own artificial intelligence chip. The stated goal, according to the sources, is to reduce the company's dependence on semiconductors from Nvidia and Huawei, which it has so far used both to train and to run its models. Unlike a training chip, this new development is designed specifically for inference—that is, the phase in which an already-trained model generates responses for end users.

If the project succeeds, it would mark a significant strategic shift for a company that has so far been known for focusing on advances in its AI models rather than on commercializing its own technology, and which has also kept a very low profile despite becoming the standard-bearer of China's ambitions in artificial intelligence. The news had an immediate market impact: Nvidia shares fell around 1.6% in premarket trading. Analyst Richard Windsor, of Radio Free Mobile, cited in the article, noted that "Nvidia is at zero in China and it's going to stay that way" and that "DeepSeek has little chance of selling silicon outside China unless it gains access to leading-edge manufacturing," adding that this development does not affect the U.S. manufacturer.

The article places this move in the context of the Chinese AI chip market, valued at $50 billion. Although Huawei's products still lag behind Nvidia's most advanced chips, the U.S. ban on exporting those components to China has allowed Huawei to capture about half of that domestic market, supplying DeepSeek and other major companies in the sector. Nonetheless, Huawei's dominance is already weakening because technology rivals such as Alibaba and Baidu are developing their own AI chips and gaining market share. DeepSeek's entry into this race is still at a very early stage: the company has been reaching out to external partners and holding talks with chip design, foundry, and memory companies. The effort, according to one of the sources, began roughly a year ago, and in recent months DeepSeek has stepped up the hiring of chip design engineers, though discreetly and without posting job openings on public platforms. The company did not respond to Reuters' request for comment.

The report frames this move within a global trend: more and more AI developers are seeking greater control over the hardware underpinning their models in order to depend less on Nvidia. It cites the case of OpenAI, which last month unveiled Jalapeño, its first in-house inference chip, developed together with Broadcom, and that of Anthropic, which, according to a previous Reuters report in April, is said to be studying building its own AI chips. For DeepSeek, however, there is an added geopolitical factor: U.S. export controls prevent Chinese companies from buying Nvidia's most advanced chips, while Beijing pressures its technology champions to develop domestic alternatives. The article recalls that DeepSeek's founder, Liang Wenfeng, acknowledged in a rare interview granted to a Chinese outlet in 2024 that chip export controls posed a challenge for the company.

As for DeepSeek's hardware history, the company has used chips from both Nvidia and Huawei. As the company itself has explained, the foundational model underpinning R1—the reasoning model whose low-cost performance triggered a plunge in U.S. tech stocks in January 2025—was trained on Nvidia's H800, a chip designed specifically for the Chinese market that Washington banned in late 2023. Since then, DeepSeek has increasingly relied on Huawei: in April it launched its V4 model adapted to Huawei's Ascend chips, and Huawei itself stated that its processors were used in part of the training of V4-Flash, a lighter version of that model. Reuters has previously reported that orders for Huawei's Ascend 950 chips by Chinese tech conglomerates soared following that launch.

The inference chip DeepSeek is said to be developing would target precisely the fastest-growing segment of AI computing: as AI applications multiply, a growing share of the sector's compute load is shifting from training models to running them, a task that can be handled with specialized chips that are cheaper and less energy-intensive than general-purpose GPUs. Even so, Reuters stresses that there is no guarantee of success: designing a competitive AI chip typically requires years of work and large amounts of capital. Added to this is a manufacturing obstacle, since the U.S. bars Chinese designers from accessing the most advanced foreign foundries, while additional U.S. restrictions have curtailed China's access to high-bandwidth memory (HBM), a critical component for AI inference chips.

Finally, the article connects this bet on an in-house chip with another recent shift in DeepSeek's strategy: opening up to outside capital. Reuters reported in June that the company planned to raise $7 billion in its first funding round, at a valuation of between $52 billion and $59 billion, thereby reversing a years-long strategy of rejecting outside investment. Overall, the piece portrays a DeepSeek that, after its global breakthrough with highly efficient AI models, is beginning to move toward deeper vertical integration—designing its own silicon and opening up its capital—against a backdrop of heavy geopolitical pressure on access to advanced semiconductors and increasingly intense domestic competition from Huawei, Alibaba, and Baidu.