US government bans Chinese AI company DeepSeek that had wiped more than $1 trillion from Wall Street in less than 2 hours, from all civilian agency IT systems

October 20, 2026 - 05:21

The US Homeland Security Department has ordered the removal of products and third-party services from Chinese AI company DeepSeek across all civilian agency IT systems. The directive bars any use of DeepSeek AI models within these environments, marking a significant escalation in the government's scrutiny of foreign artificial intelligence tools.

The order follows concerns about data security and the potential risks associated with AI platforms developed outside the United States. DeepSeek recently drew global attention after its market debut wiped more than $1 trillion from Wall Street in less than two hours, a shock that raised questions about the competitive pressure Chinese AI firms place on American technology companies.

Federal agencies under the DHS umbrella must now audit their systems and eliminate any reliance on DeepSeek products or services provided through third parties. The move aligns with broader efforts to tighten controls over software supply chains and protect sensitive government data from external access.

Industry analysts note that the ban could affect contractors and vendors that integrated DeepSeek tools into their offerings for public sector clients. Compliance teams are expected to review existing contracts and identify any dependencies that fall under the new restrictions.

The department has not disclosed a timeline for full compliance, but agencies are expected to act promptly. The decision signals a harder line on AI procurement and could prompt similar actions from other federal bodies reviewing foreign-developed models.