Chinese AI Firm DeepSeek Develops Own Chip, Pressures Nvidia Shares

Chinese artificial intelligence company DeepSeek is reportedly developing its own AI chip, aiming to reduce reliance on Nvidia and Huawei chips currently used to run its AI models, according to a Reuters report. The new chip is intended for the inference stage of AI, where trained models provide responses to users, a phase that has become a major growth driver in the AI industry due to its high computational demands as user numbers increase.

DeepSeek’s move marks a significant strategic shift, as the company has been known primarily for developing AI models rather than hardware. The development has reignited concerns about Nvidia’s future market position, causing Nvidia’s stock to drop about 2% in early trading on Wall Street. If successful, DeepSeek’s chip could also place it in direct competition with Huawei, which has seen growing demand for AI chips in China amid U.S. export restrictions on advanced Nvidia chips.

The project is still in early stages, with DeepSeek reportedly in talks with semiconductor design, manufacturing, and memory technology firms. The company quietly expanded its chip design engineering recruitment over recent months without public job postings. DeepSeek gained international attention last year after launching AI models that surprised Silicon Valley and is considered a pioneer in China’s AI sector, though it maintains a low public profile and did not respond to Reuters’ inquiries.

This development aligns with a broader trend in China’s tech industry, where giants like Alibaba and Baidu are also developing their own AI chips to reduce dependence on external suppliers and navigate U.S. trade restrictions on advanced chip exports. Meanwhile, internal competition intensifies for Huawei, which has become a key AI chip supplier in China amid these sanctions.