Australia raises privacy concerns over China’s DeepSeek AI: 'Need to be very careful'

Australia’s Science Minister, Ed Husic, has expressed concerns about the potential privacy and data management issues posed by DeepSeek, a new Chinese AI chatbot that has quickly gained popularity globally. The app surged to the top of the U.S. iPhone App Store in January 2025, surpassing OpenAI’s ChatGPT, which had been dominating the market. Despite its growing user base, Minister Husic highlighted that the rapid rise of DeepSeek raises significant questions about data privacy and consumer protection, which remain unresolved.

Minister Husic noted that although DeepSeek has shown impressive performance and growing consumer interest, there is a lack of clarity regarding its data privacy policies. He emphasized that Chinese tech companies, known for creating cost-effective and efficient products, might not meet the data privacy expectations in markets outside of China, especially in countries with strict privacy regulations. While DeepSeek may be widely accepted in China, its data management practices could pose challenges when it enters regions like the European Union or the U.S., where data privacy is heavily regulated.

Husic’s concerns stem from the contrasting data protection approaches between China and Western countries. In China, data privacy regulations are often less stringent, which could conflict with international privacy standards. For example, in the European Union, the General Data Protection Regulation (GDPR) imposes strict requirements on how companies handle personal data. This difference in regulatory frameworks could result in DeepSeek facing difficulties in gaining acceptance outside China, especially if it is found to be non-compliant with privacy laws in these regions.

The launch of DeepSeek also had significant implications for the global semiconductor market. Following the release of DeepSeek, Nvidia, a leading U.S.-based semiconductor company, saw its stock value plummet by nearly 20%, erasing approximately $600 billion in market capitalization. This decline was attributed to concerns that DeepSeek’s AI models, which are able to deliver similar performance to Western models like OpenAI’s GPT with significantly fewer chips, could reduce the demand for high-performance hardware. The question of whether specialized hardware, like the powerful chips made by companies such as Nvidia, will remain necessary in the AI industry is becoming more pressing as DeepSeek’s cost-effective approach challenges traditional assumptions about the infrastructure required for advanced AI.

DeepSeek's R1 AI model, which powers the chatbot, has been lauded for its efficiency, as it achieves performance on par with Western AI models but requires far fewer computational resources. This has led to concerns within the industry that the traditional reliance on expensive, high-performance hardware may not be sustainable. Companies like Nvidia, which rely heavily on the demand for AI chips, face uncertainty as AI models like DeepSeek demonstrate that efficient performance can be achieved without the same level of hardware investment. This shift could disrupt the AI industry’s reliance on massive computational power, potentially reshaping the economics of AI development.

The rise of DeepSeek is also sparking debates in other countries, particularly in India, about the development of AI models. India is evaluating whether to build its own AI models from the ground up or to leverage existing open-source models for further development. DeepSeek’s success, alongside the performance of similar Chinese AI models, highlights the possibility of creating powerful AI systems at a fraction of the cost compared to traditional models. For countries with limited resources, this represents a potential opportunity to engage in the AI race without the need for substantial investment in hardware. The rise of cost-effective models could lower the entry barriers for emerging markets to develop their own AI capabilities and increase their competitiveness in the global AI landscape.

As DeepSeek continues to grow, the strain on its infrastructure could become a concern. The app experienced a major outage in late January 2025, attributed to a surge in user traffic. This incident raised questions about DeepSeek's ability to scale effectively in the face of rapidly increasing demand. As the app continues to expand globally, it will need to address potential scalability issues to ensure a seamless user experience. The ability to manage such growth will be crucial for DeepSeek’s success in new markets, especially as the app’s user base expands internationally.

In conclusion, while DeepSeek’s rise has garnered attention for its efficiency and potential to disrupt the AI market, it also raises critical questions about data privacy, hardware infrastructure, and scalability. The tech industry is closely monitoring DeepSeek’s development, as it could redefine the economics of AI development and reshape global markets. However, its ability to navigate privacy regulations and scale its infrastructure will determine whether it can maintain its momentum and expand successfully beyond China. The app’s impact on AI technologies, market dynamics, and data privacy laws will likely continue to shape the future of artificial intelligence.