The emergence of DeepSeek, a Chinese AI model, has sparked significant controversy and concern within the U.S. tech industry. The developers behind ChatGPT, OpenAI, suspect that DeepSeek's ultra-cheap models may have been built using OpenAI's data, a claim that has led to heightened tensions and scrutiny.

This week, former President Donald Trump labeled DeepSeek as a "wake-up call" for the U.S. tech sector, especially after Nvidia, a leading GPU manufacturer crucial for AI operations, experienced a staggering $600 billion drop in market value. The stock market felt the ripple effect, with Nvidia's shares plummeting by 16.86%—marking the largest single-day loss in Wall Street history. Other tech giants like Microsoft, Meta Platforms, and Google's parent company Alphabet saw declines ranging from 2.1% to 4.2%, while AI server maker Dell Technologies dropped by 8.7%.

DeepSeek's R1 model, built on the open-source DeepSeek-V3, claims to be a cost-effective alternative to Western AI models like ChatGPT. It reportedly requires significantly less computing power and was trained for an estimated $6 million. Despite some skepticism about these claims, DeepSeek's impact has led investors to question the massive investments American tech companies are making in AI, causing widespread market jitters. The model's popularity surged, propelling it to the top of the most downloaded free app chart in the U.S.

Bloomberg reported that OpenAI and Microsoft are investigating whether DeepSeek used OpenAI's API to integrate OpenAI's AI models into its own. OpenAI expressed concerns about "PRC (China) based companies—and others—constantly trying to distill the models of leading U.S. AI companies." Distillation, a technique used to train AI models by extracting data from more advanced ones, violates OpenAI's terms of service.

OpenAI emphasized its commitment to protecting its intellectual property and working closely with the U.S. government to safeguard its most advanced models from adversarial and competitive threats. David Sacks, Trump's AI czar, told Fox News that there is "substantial evidence" that DeepSeek distilled knowledge from OpenAI's models, and predicted that leading U.S. AI companies would take steps to prevent such practices in the coming months.

Amidst these developments, observers have noted the irony of OpenAI's accusations, given its own history of using copyrighted material to train ChatGPT. Tech PR and writer Ed Zitron highlighted this hypocrisy on social media, pointing out OpenAI's reliance on "stealing literally the entire internet" to develop its AI.

In January 2024, OpenAI admitted in a submission to the UK's House of Lords communications and digital select committee that it was "impossible" to create AI tools like ChatGPT without copyrighted material. The company argued that limiting training data to public domain works would not meet the needs of modern AI systems.

The issue of training AI models on copyrighted materials has become a focal point in the tech industry, especially with the rise of generative AI. In December 2023, The New York Times sued OpenAI and Microsoft for the "unlawful use" of its work, to which OpenAI responded by asserting that such training constitutes "fair use" and that the lawsuit was without merit. This followed a lawsuit by 17 authors, including George R. R. Martin, in September 2023, alleging "systematic theft on a mass scale."

Further complicating matters, in August 2023, District Judge Beryl Howell upheld a U.S. Copyright Office ruling from 2018 that AI-generated art cannot be copyrighted, emphasizing the necessity of human creativity in copyright protection.