Microsoft and OpenAI are investigating whether DeepSeek, a Chinese artificial intelligence startup, illegally copying proprietary American technology, sources told Bloomberg on Wednesday.
Microsoft security researchers last fall identified individuals suspected of ties to DeepSeek who were extracting large amounts of data through OpenAI’s application programming interface (API), according to the outlet. The interface allows software developers to purchase access to OpenAI’s proprietary models for integration into their own programs.
“We know that groups in the [People’s Republic of China] are actively working to use methods, including what’s known as distillation, to try to replicate advanced U.S. AI models,” a spokesperson for OpenAI told the Daily Caller News Foundation. “We are aware of and reviewing indications that DeepSeek may have inappropriately distilled our models, and will share information as we know more. We take aggressive, proactive countermeasures to protect our technology and will continue working closely with the U.S. government to protect the most capable models being built here.”
Microsoft, OpenAI’s largest investor, reportedly notified OpenAI of the breach.
White House AI and crypto czar David Sacks more pointedly accused DeepSeek of “distilling” proprietary data from the U.S. firm in a Fox News interview Tuesday on “The Story with Martha MacCallum.” In the context of software and AI, distillation is the process of simplifying or compressing advanced models while preserving their essential characteristics.
“There’s substantial evidence that what DeepSeek did here is they distilled the knowledge out of OpenAI’s models,” Sacks said. “And I think one of the things you’re going to see over the next few months is our leading AI companies taking steps to try and prevent distillation … that would definitely slow down some of these copycat models.”
DeepSeek upended the U.S. tech sector this week with the release of its open-source R1 model. The Chinese company said R1 surpasses leading firms across multiple industry benchmarks, particularly those in the hard sciences. DeepSeek claimed it for under $6 million, far less than the billions American companies like OpenAI and Anthropic spend on their models.
The startup’s meteoric rise sparked investor doubts about Nvidia, whose hardware has long been considered essential for scaling advanced language models, and prompted a $600 million valuation tumble by Monday’s market close — the largest single-day decline for any U.S. company in history. DeepSeek’s app also surged past U.S. services like ChatGPT and Claude to reach the No. 1 spot on Apple’s App Store.
OpenAI CEO Sam Altman said the Chinese startup is “an impressive model, particularly around what they’re able to deliver for the price.” He added his company will release “much better” models.
Microsoft did not immediately respond to the DCNF’s request for comment.
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