DeepSeek Is Building Its Own AI Chips to Cut Reliance on Nvidia and Huawei

DeepSeek, the Chinese AI startup that has made waves with its open-weight models and aggressive pricing, is now quietly building its own chips. If the project pays off, it could fundamentally rewire who DeepSeek depends on — and who competes with whom in China’s AI hardware market.

Three people familiar with the matter told Reuters that DeepSeek is developing a custom AI chip designed specifically for inference — the phase where a trained model actually processes new data and generates output, as opposed to the training phase that gobbles up GPU clusters for weeks. The project is about a year old and still in its early stages, the sources said.

The strategic logic is straightforward. DeepSeek currently relies on Nvidia GPUs, hardware that has become harder to obtain in China under US export restrictions, and on chips from Huawei, which has emerged as a domestic alternative. By designing its own silicon, DeepSeek is trying to control its own destiny, much the way companies like Google (TPU), Amazon (Trainium), and OpenAI (via partnerships) have done.

An analyst at Radio Free Mobile, Richard Windsor, offered a sobering assessment: “Nvidia’s market share in China has already essentially hit zero and it’s going to stay there.” He added that unless DeepSeek can access the world’s most advanced fabrication processes, its chip is unlikely to sell outside China — which means the immediate competitive pressure on Nvidia is minimal.

Still, the market reacted. Nvidia’s stock dipped about 1.6% in pre-market trading after the news broke — a reminder that even a speculative challenge from a well-known AI name can rattle investor nerves.

DeepSeek has not publicly commented on the chip project, and the three sources spoke on condition of anonymity because the plans are not public. What is clear is that the company has been ramping up hiring for chip design engineers over the past several months — but quietly, without posting open job listings on public boards.

The move also sets up a fascinating dynamic inside China. If DeepSeek succeeds, it becomes a software AI company that also builds its own chips — potentially putting it on a collision course with Huawei’s chip division. The same Huawei that many Chinese AI companies have turned to as an alternative to Nvidia could find itself competing with one of its biggest customers.

For now, the project is early-stage. DeepSeek is talking to chip design firms, foundries, and memory manufacturers, the sources said. There are no tape-outs yet, no confirmed manufacturing partners, no performance numbers. But the direction is unmistakable: DeepSeek does not want to be at the mercy of anyone else’s hardware roadmap.