A dispute is escalating between OpenAI and Chinese AI startup DeepSeek, with allegations that the latter improperly leveraged OpenAI’s proprietary models to develop a competing system.
Bloomberg reported that OpenAI and Microsoft conducted an investigation last year, ultimately blocking accounts in August that were suspected of violating OpenAI’s terms of service—accounts they now believe were linked to DeepSeek.
At the heart of the controversy is AI distillation, a technique where smaller models are trained using the outputs of more advanced systems. OpenAI argues that while this method is common, DeepSeek went beyond acceptable use by employing it to build a direct rival. The Financial Times cites sources within OpenAI who claim DeepSeek extracted knowledge from OpenAI models outside of permissible research boundaries.
DeepSeek’s R1 model has gained attention for delivering high-level reasoning at a remarkably low development cost—just $5.6 million, a fraction of what U.S. tech giants typically spend. The company’s rapid rise has been underscored by the app’s dominance on Apple’s App Store charts, where it has reached the top position in multiple countries, including the United States.
The allegations have sparked concern at the highest levels of government and industry. Speaking to Fox News, White House AI advisor David Sacks stated that there is “substantial evidence” that DeepSeek extracted information from OpenAI’s systems, a claim that could prompt regulatory scrutiny.
The impact has already been felt in financial markets—with reports suggesting that Nvidia’s stock plummeted 17%, erasing $589 billion in market value in a single day, as investors reassessed the long-term viability of expensive AI hardware investments in light of DeepSeek’s cost-efficient breakthroughs.
This dispute raises broader concerns about AI ethics, intellectual property, and competition as the race to dominate artificial intelligence technology intensifies.
Disclaimer: The Apple Square is a technology-focused platform and typically does not cover political topics. However, we are reporting on this issue due to its significant impact on the tech industry and users. We aim to provide objective coverage and encourage readers to seek additional sources for broader context.
