Microsoft and OpenAI are investigating a potential breach of the AI firm’s system by a group allegedly linked to Chinese AI startup DeepSeek.

According to Bloomberg, the investigation stems from suspicious data extraction activity detected in late 2024 via OpenAI’s application programming interface (API), sparking broader concerns over international AI competition.

Microsoft, OpenAI’s largest financial backer, first identified the large-scale data extraction and informed the ChatGPT maker of the incident. Sources believe the activity may have violated OpenAI’s terms of service, or that the group may have exploited loopholes to bypass restrictions limiting how much data they could collect.

DeepSeek has quickly risen to prominence in the competitive AI landscape, particularly with the release of its latest model, R-1, on 20 January.

Billed as a rival to OpenAI’s ChatGPT in performance but developed at a significantly lower cost, R-1 has shaken up the tech industry. Its release triggered a sharp decline in tech and AI stocks that wiped billions from US markets in a single week.

David Sacks, the White House’s newly appointed “crypto and AI czar,” alleged that DeepSeek may have engaged in illicit activities, including the unauthorized collection of sensitive data.

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