DeepSeek, which has gained popularity in the U.S. since its release in January 2025, collects user data stored on servers in China, where local authorities can access it at any time under Chinese law.

This decision underscores Microsoft's commitment to responsible AI usage and the need for evaluating the data-handling practices of AI tools amid rising national security concerns.

Concerns have been raised about DeepSeek's potential to spread misinformation, particularly in an era where digital propaganda is increasingly sophisticated.

While DeepSeek is banned for internal use, Microsoft continues to allow other AI applications like Perplexity, indicating a selective approach to AI competition and data integrity.

The ban reflects a growing tension between Western tech firms and Chinese AI companies, as scrutiny intensifies over AI platforms that may be linked to intelligence gathering and propaganda dissemination.

Smith emphasized the importance of ensuring data security and neutrality in content, particularly as awareness of data privacy grows among users.

In conjunction with this ban, Microsoft is reassessing its cloud infrastructure strategy, leading to the cancellation of hundreds of megawatts in US data center leases to ensure compliance with local regulations.

Despite geopolitical tensions, Microsoft's stock has shown resilience, increasing 15% year-to-date, indicating investor confidence in its long-term cloud and AI strategy.

Microsoft's Azure cloud business, which contributes significantly to its revenue, is being positioned as a secure option for clients concerned about foreign data risks.

Microsoft has officially banned the use of the Chinese AI app DeepSeek among its employees, citing data security and propaganda concerns as highlighted by Vice Chairman Brad Smith during a recent US Senate hearing.

Although DeepSeek is an open-source application, Microsoft has chosen not to include it in its app store, reflecting its concerns regarding the app's reliability and safety.

This move may prompt other tech companies to adopt stricter guidelines on third-party applications to safeguard corporate data amid increasing data breaches.