"U.S. Reverses Stance: DeepSeek AI Now Classified as IP Theft"

In a dramatic turn of events, U.S. officials have reversed their stance on China's DeepSeek AI, now classifying it as a potential case of intellectual property theft, just a day after President Donald Trump framed it as a "positive" development. White House artificial intelligence and crypto czar David Sacks claimed there is "substantial evidence" that DeepSeek "distilled" knowledge from OpenAI's models, a process he likened to intellectual property theft.

Distillation, a technique used in AI development, involves training a smaller AI model using the outputs of a more advanced one, allowing it to replicate similar capabilities with fewer resources. Sacks' comments came a day after Trump downplayed concerns over DeepSeek's impact, calling it both a "positive" and a "wake-up call" for Silicon Valley, even as its rapid ascent sent markets into turmoil.

The launch of DeepSeek's R1 model triggered a massive sell-off in tech stocks, wiping over $1 trillion from the Nasdaq Composite Index. NVIDIA suffered the worst single-day loss in U.S. history, plunging by $600 billion, while Alphabet and Microsoft also took major hits. Speaking to Fox News on Tuesday, Sacks suggested that DeepSeek used responses from OpenAI's models to train its own, though he did not cite the source of this evidence.

Separately, OpenAI has also raised concerns over DeepSeek's methods, telling the Financial Times that it has found signs of "distillation" in R1's development. While distillation is a common technique in AI development, OpenAI's terms explicitly prohibit using its outputs to train competing models. A person familiar with the company's stance noted that the issue isn't just about knowledge transfer but whether DeepSeek extracted model outputs to build a direct rival.

Another unnamed source added that OpenAI and its partner Microsoft had already taken action last autumn, investigating accounts believed to be linked to DeepSeek that were accessing OpenAI's API. After finding signs of distillation in violation of its terms of service, OpenAI blocked these accounts, cutting off their access.

DeepSeek's rise was nothing short of explosive as it quickly rose to the top of the App Store charts, outpacing major U.S. competitors like OpenAI's ChatGPT, Google's Gemini, and Anthropic's Claude. What made it even more disruptive was its ability to match the performance of OpenAI's O