US officials probe China’s DeepSeek AI amid security and privacy scrutiny

The Chinese AI app DeepSeek has come under intense scrutiny from both the US and European regulators, raising alarms over national security risks, data privacy concerns, and potential intellectual property theft.

The White House confirmed on Tuesday that the National Security Council (NSC) is reviewing the AI model’s implications as fears mount that Chinese advancements in AI could threaten the dominance of US-based AI firms including OpenAI and Google.

“This is a wake-up call to the American AI industry,” White House Press Secretary Karoline Leavitt said responding to reporters during her first press briefing, reinforcing the administration’s commitment to ensuring US leadership in AI.

Leavitt also confirmed during the briefing that she had personally discussed the matter with the NSC.

Meanwhile, Italy’s data protection authority, the Garante, launched its own investigation into DeepSeek, demanding clarity on its data collection practices. The Italian regulator has given DeepSeek and its affiliated companies 20 days to respond, making it one of the first regulatory bodies to take direct action against the Chinese AI startup.

“The Authority, considering the potential high risk for the data of millions of people in Italy, has asked the two companies and their affiliates to confirm which personal data are collected, from which sources, for which purposes, what is the legal basis of the processing, and whether they are stored on servers located in China,” the regulator said in a statement.

The Garante is seeking details about the personal data collected, its sources, its legal basis for processing, and whether any data is stored in China — raising broader concerns over data sovereignty and compliance with Europe’s stringent privacy laws.

Italy’s move comes amid broader concerns about foreign AI models’ compliance with regional regulations. The country had previously banned OpenAI’s ChatGPT in 2023 over potential violations of EU privacy rules, demonstrating its proactive stance in regulating AI models that handle personal data.

“According to its privacy policy, DeepSeek explicitly says it can collect “your text or audio input, prompt, uploaded files, feedback, chat history, or other content” and use it for training purposes,” research firm Forrester said in a statement. “It also states it can share this information with law enforcement agencies [and] public authorities at its discretion.”

Forrester suggested enterprises to “Educate and inform your employees on the ramifications of using this technology and inputting personal and company information into it. Align with product leaders on whether developers should be experimenting with it and whether the product should support its implementation without stricter privacy requirements.”

IP theft concerns deepen in the US

Beyond privacy issues, US officials are also raising alarms over the possibility of intellectual property (IP) theft tied to DeepSeek.

Trump’s AI and crypto policy lead, David Sacks, suggested that China may have leveraged a technique called “distillation,” where AI models learn from other advanced systems—raising the possibility that US-developed AI technology may have been replicated without authorization.

“I think one of the things you’re going to see over the next few months is our leading AI companies taking steps to try and prevent distillation,” Sacks said in a Fox News interview. “That would definitely slow down some of these copycat models.”

“DeepSeek’s ‘open source’ nature opens it up for exploration – by both adversaries and enthusiasts,” said Chester Wisniewski, director and global field CTO at Sophos. “Like Llama, it can be played with and largely have the guardrails removed. This could lead to abuse by cybercriminals, although it’s important to note that running DeepSeek still requires far more resources than the average cybercriminal has.”

During his administration, former President Joe Biden imposed sweeping export controls on AI-related technologies to slow China’s AI progress. Now, Trump’s administration is signaling it may take even stronger measures.

Market reactions and competitive pressure

The emergence of DeepSeek has already rattled the tech industry. On Monday, global investors dumped shares of major US AI companies, fearing the rise of a low-cost Chinese competitor. DeepSeek, which presents itself as a budget-friendly alternative to AI models like OpenAI’s ChatGPT, has quickly gained traction — briefly overtaking ChatGPT as the top AI assistant on Apple’s App Store in the US.

“More pressing for companies, however, is that, due to its cost-effectiveness, we are likely to see various products and companies adopt DeepSeek, which potentially carries significant privacy risks,” Wisniewski added. “As with any other AI model, it will be critical for companies to make a thorough risk assessment, which extends to any products and suppliers that may incorporate DeepSeek or any future LLM. They also need to be certain they have the right expertise to make an informed decision.”

Despite the concerns, Trump framed the development as an opportunity for American firms to step-up their innovation efforts. “The release of DeepSeek AI from a Chinese company should be a wake-up call for our industries,” Trump told House Republicans at their annual policy retreat. “We need to be laser-focused on competing to win.”

Trump also suggested that competition from China could drive American firms to develop AI models at lower costs. “We always have the ideas. We’re always first,” he said, signaling confidence in US ingenuity.

Industry watchers too believe the rise of DeepSeek will accelerate competition.

“DeepSeek’s approach is expected to accelerate the shift toward open-source AI, compelling tech giants to either adapt or risk being left behind,” said  Muskaan Jain, senior analyst at Everest Group. “This shift will likely trigger price wars, faster AI development cycles, and heightened geopolitical tensions over AI dominance.”

What’s next?

With regulatory scrutiny intensifying on both sides of the Atlantic, DeepSeek’s fate in key global markets remains uncertain. If the NSC’s review results in policy recommendations, American AI firms may soon face even stricter export controls and regulations designed to prevent unauthorized AI knowledge transfers.

Meanwhile, DeepSeek’s compliance with European privacy regulations could dictate whether it maintains a foothold in markets like Italy and beyond. If found in violation, the Chinese AI firm could face penalties or access restrictions, echoing past actions against OpenAI.

For US enterprises, these developments signal both risks and opportunities. While competition from China grows, American firms will be under increasing pressure to maintain their technological edge while navigating evolving regulatory frameworks. In an industry moving at an unprecedented pace, policymakers and business leaders alike will need to balance innovation with security and compliance.

“If DeepSeek secures a foothold in the AI market, western firms must respond with responsible innovation and strategic investments to maintain technological leadership while ensuring AI remains ethical and secure in an increasingly fragmented global market,” Jain added.