Semiconductor giant Nvidia (NVDA) was higher today on reports that Chinese rival DeepSeek has delayed the release of its new AI model because of issues with Huawei chips.
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Training Hurdles
According to a report in the Financial Times, DeepSeek has faced ongoing technical hurdles in training its R2 model with Huawei’s Ascend AI chips.
This has led DeepSeek, which burst onto the scene back in January with a low-cost R1 AI model challenging the dominance of the Magnificent Seven stocks, to use Nvidia chips for training purposes.
However, it is understood that DeepSeek has yet to complete a successful training run on the Ascend chip and is still working with Huawei to ensure the model is compatible with Ascend for inference.
It is even reported that Huawei has dispatched a crack team of engineers to DeepSeek’s office to help solve the puzzle.
China Blow
This will be a blow to the Chinese government in its battle for AI supremacy with the U.S. Since the release of R1, DeepSeek has been urged by the authorities to use the Ascend processor instead of Nvidia technology.
This is because China wants to hike up the demand for and production of domestic chips and reduce reliance on the U.S. given the geopolitical tussles between the two nations.
This includes the current tariff trade dispute as well as other issues such as security threats to Taiwan.
Indeed, according to Reuters, only this week the Cyberspace Administration of China summoned companies including Tencent (TCEHY), ByteDance, Baidu (BIDU), and several smaller firms over their purchases of Nvidia chips, asking them to justify the purchases.
It comes as Nvidia and AMD (AMD) look to restart exports of chips to China following a revenue-sharing license deal with the U.S. government.
It’s a controversial deal in some quarters, but unlikely to do much damage to their rampant stock price lifts this year.
As for the R2, which had been expected to be launched in May, there is no new date for its arrival.
DeepSeek, it seems, badly needs a spur to help reinvigorate its business. According to Chinese data group Mydrivers, its usage rate has dropped from 50% at the beginning of the year to just 3% at present.
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