China's DeepSeek developing AI chip to cut reliance on Nvidia: Report

China’s tech company DeepSeek is building its own home-grown AI chip in a push to reduce dependence on Nvidia and Huawei for training purposes.

According to sources privy to the matter, the chip in the process of making is especially designed for interface, not for training the new models. In the interface stage, an already trained model creates responses for users.

In the case of success in developing the domestic AI chip, DeepSeek would be able to expand its presence in the semiconductor industry, potentially adding to challenges faced by tech giant Huawei. Soon after the announcement, the shares of Nvidia, the US-based tech company, dropped by 2 percent in premarket trading.

DeepSeek is already famous in the competitive tech landscape after releasing efficient AI models giving tough challenges to models in Silicon Valley.

Despite trailing Nvidia’s hardware by a significant margin, Huawei has captured roughly 50 percent of China’s $50 billion AI chip market. This surge, driven by US export restrictions, has established Huawei as a primary supplier for key domestic innovators, including DeepSeek.

The interface chip in question would capture the fastest-growing AI computing demand in the midst of changing patterns from training models to running them.

However, developing AI chips is fraught with several challenges as designing competitive and efficient chips requires years and hefty money. Moreover, the US restrictions also prevent Chinese designers from accessing the advanced tools.

This announcement comes as DeepSeek seeks to raise $7 billion in a maiden funding round valuing it at between $52 billion and $59 billion, as reported by Reuters.