OpenAI claims to have found evidence that Chinese AI startup DeepSeek secretly used data produced by OpenAI’s technology to improve their own AI models, according to the Financial Times. If true, DeepSeek would be in violation of OpenAI’s terms of service. In a statement, the company said it is actively investigating.

OpenAI believes DeepSeek used a process called “distillation,” which helps make smaller AI models perform better by learning from larger ones.

David Sacks says OpenAI has evidence that Chinese company DeepSeek used a technique called "distillation" to build a rival model.

DeepSeek is causing havoc throughout the AI industry. U.S.-based tech companies that have heavily invested in AI saw their stocks take a tumble this week after the China-based startup released a new AI model on par with OpenAI's latest model, yet much cheaper to train — plus, DeepSeek made it free and open source.

Microsoft Corp. and OpenAI are investigating whether data output from OpenAI’s technology was obtained in an unauthorized manner by a group linked to Chinese artificial intelligence startup DeepSeek,