Microsoft and OpenAI are investigating whether DeepSeek, a fast-growing Chinese AI startup, may have accessed OpenAI’s proprietary technology without authorization.
According to a Bloomberg report citing sources familiar with the matter, Microsoft security researchers detected unusual activity in late 2024, where individuals suspected to be linked to DeepSeek extracted a significant amount of data through OpenAI’s application programming interface (API). This API allows developers to integrate OpenAI’s advanced AI models into their own applications via a paid license.
Microsoft, OpenAI’s biggest investor and technology partner, flagged the activity to OpenAI, prompting an internal review.
“If confirmed, such actions could violate OpenAI’s terms of service or indicate an attempt to bypass restrictions on data usage,” Bloomberg quoted sources as saying.
David Sacks, a former U.S. government AI official, told Fox News on Tuesday that there is “substantial evidence” suggesting DeepSeek used OpenAI’s models to develop its own AI technology. He pointed to a technique known as AI distillation, where one model is trained using the outputs of another to replicate its capabilities.
“There’s substantial evidence that DeepSeek distilled knowledge from OpenAI models, and I don’t think OpenAI is happy about this,” Sacks said, without providing further details.
While OpenAI has not directly addressed DeepSeek, a company spokesperson acknowledged the ongoing risks posed by AI competitors.
“We know PRC-based companies and others are constantly trying to distill the models of leading U.S. AI firms,” the spokesperson said, emphasizing that OpenAI has implemented countermeasures to protect its intellectual property.
“As the global leader in AI, we are working closely with the U.S. government to ensure that the most capable AI models remain protected from adversaries and competitors,” the statement added.
DeepSeek’s rapid rise sparks concerns
DeepSeek, which recently unveiled its open-source AI model, DeepSeek-R1, claims its technology rivals or surpasses models from OpenAI, Google, and Meta—at a fraction of the usual development cost.
The company’s meteoric rise has unsettled Silicon Valley, raising fears of intellectual property theft and concerns that China could circumvent U.S. export restrictions on advanced AI.
On Monday, DeepSeek’s emergence sent shockwaves through global tech markets, wiping nearly $1 trillion off the market value of AI-linked giants, including Microsoft, Nvidia, Oracle, and Alphabet (Google’s parent company).
The Microsoft-OpenAI probe underscores the intensifying U.S.-China AI rivalry, as Washington tightens restrictions on AI chip exports to maintain its technological edge. However, DeepSeek’s success signals that Chinese firms are finding ways to innovate—potentially reshaping the balance of power in global AI leadership.
