DeepSeek’s AI model, as capable as OpenAI’s work yet developed at a fraction of the cost, sparked a broad selloff in tech and semiconductor shares last week as investors were forced to rethink the U.S’s AI lead and China’s ability to catch up.
Now, the Chinese AI model is spooking the public sector, too.
On Thursday, South Korea blocked access to DeepSeek on government devices, according to news agency Yonhap. Ministry sources told the outlet that officials were concerned over how DeepSeek collected user data.
South Korea’s government is the latest in Asia to block access to the Chinese AI service. On Tuesday, Australia banned DeepSeek from government systems, citing national security. Australia’s intelligence service found the technology posed an unacceptable risk, said Home Affairs Minister Tony Burke.
Taiwan’s government also banned its departments from using DeepSeek earlier this week, claiming the Chinese AI posed a security risk.
Outside Asia, Italy’s government became the first to take action against DeepSeek when its privacy watchdog ordered a nationwide block over user data concerns on Jan. 28. The Chinese AI startup has 20 days to detail how its chatbot complies with European data protection law. Ireland has also requested more details from DeepSeek.
Nominations are now open:
Fortune is now accepting nominations for the 2025 Southeast Asia 500—the definitive ranking of the region’s largest companies. Start your nomination here.
U.S. government agencies, like NASA and the U.S. Navy, have also blocked employees from using DeepSeek’s chatbot over security and privacy concerns.
The rise of DeepSeek
In mid-January, the Hangzhou, China–based AI company released its R1 model, claiming it met, if not exceeded, OpenAI’s o1 model released last year.
That claim followed a December announcement that DeepSeek’s large-language model, called V3, was trained using just under $6 million worth of computing power, far less than the training costs for U.S.-based AI companies like OpenAI and Anthropic.
That success shook investor assumptions that the AI boom will need massive capital expenditure for things like semiconductors and data centers, as well as pierced hopes that developers like OpenAI will be able to maintain their lead for long.
DeepSeek isn’t the only Chinese AI company to release new AI models. Several other Chinese firms, large and small, released their latest models ahead of the Lunar New Year holiday.
China’s sudden success throws a wrench into U.S. plans to lead the AI arms race. Since 2022, Washington has imposed strict export controls on sales of advanced chips and chipmaking equipment to China, in the hope of constraining its development of AI, among other strategic technologies.
