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In an internal email sent to its members on Friday, the Navy explicitly warned against using DeepSeek’s AI “in any capacity.” The decision follows concerns regarding the model’s origin and its potential implications for national security. A spokesperson for the U.S. Navy confirmed the authenticity of the email, stating that the restriction aligns with the Department of the Navy’s Chief Information Officer’s generative AI policy.

DeepSeek’s Rise and Market Disruptions

DeepSeek recently launched its advanced reasoning AI model, R1, positioning itself as a formidable competitor to OpenAI’s technology. The model’s open-source nature has allowed rapid adoption within the AI community, and its app swiftly climbed to the top of Apple’s App Store, surpassing OpenAI’s ChatGPT.

The rapid success of DeepSeek has sent shockwaves through financial markets. Investors are now concerned that AI models will require significantly less computing infrastructure than previously anticipated. DeepSeek disclosed in December that it built its large language model within just two months, with an investment of under $6 million—far lower than the budgets of OpenAI, Google, and Anthropic. Despite ongoing U.S. restrictions on semiconductor exports to China, the company’s breakthrough has raised alarms on Wall Street.

As a result, major AI chipmakers, including Nvidia and Broadcom, experienced a sharp 17% drop in stock value on Monday, erasing nearly $800 billion in market capitalization. This contributed to a broader 3.1% decline in the Nasdaq index.

Official Navy Warning

The Navy’s advisory, issued before the market downturn, urged personnel to avoid downloading, installing, or using DeepSeek’s AI for both professional and personal purposes. The directive was distributed to OpNav, indicating it was an all-hands memo. The warning stemmed from the Naval Air Warfare Center Division’s Cyber Workforce Manager, reinforcing the Navy’s stance against the emerging AI model.

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Meanwhile, DeepSeek temporarily halted new user registrations on Monday, citing large-scale cyberattacks on its services, before resuming operations later in the day.

Political and Industry Reactions

Former President Donald Trump, who recently assumed office, weighed in on the matter, stating that DeepSeek’s rapid rise should serve as a “wake-up call” for American technology firms. Trump, currently involved in efforts to keep Chinese-owned social media app TikTok operational in the U.S., had previously advocated for banning the platform due to national security risks.

David Sacks, Trump’s appointed AI and crypto czar, echoed concerns on social media, acknowledging that DeepSeek’s R1 model underscores the intensifying AI race. Meta has its own open-source AI initiative and reportedly formed four “war rooms” to address DeepSeek-related developments.

Industry leaders have also acknowledged DeepSeek’s impact. Scale AI CEO Alexandr Wang described its R1 model as “earth-shattering,” stating that it rivals the best AI models produced in the U.S. He characterized the escalating competition between China and the U.S. as an “AI war.”

In response, the Trump administration last week announced Stargate, a joint initiative between OpenAI, Oracle, and SoftBank, aimed at bolstering AI infrastructure investments in the U.S.

With global AI dominance at stake, the U.S. government and private sector are ramping up efforts to maintain technological leadership amid China’s rapid advancements.

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