DeepSeek has developed its own custom inference-focused AI chip, a project that began a year ago, after its January 2025 R1 model release erased $600 billion from Nvidia's market value in one day. The move directly challenges Nvidia and Huawei Ascend dominance in China's $50 billion AI chip market. Nvidia recorded a $4.5 billion inventory charge in Q1 2026 with another $8 billion expected in Q2 after export controls slashed its China revenue share from 20-25 percent to 9 percent. DeepSeek shifted to Huawei Ascend 950 processors for its April 2026 V4 model before reversing its no-funding policy to secure $7 billion at a $52-59 billion valuation specifically to fund hardware development. The effort mirrors broader AI industry trends as OpenAI, Google and Meta also pursue custom silicon to cut Nvidia dependence while US curbs limit access to advanced foundries and high-bandwidth memory.