DeepSeek eyes $20B+ valuation as Tencent and Alibaba circle first funding round
What's the deal? DeepSeek, the Chinese AI startup behind a series of open-source models that shook the industry in January 2025, is in talks to raise its first outside capital at a valuation above $20B. Tencent and Alibaba are among the prospective investors, according to The Information, citing four people familiar with the discussions.
The company, owned by Chinese hedge fund High-Flyer QuantDealroom has a profile for this one. Try Dealroom → and co-founded by Liang WenfengDealroom has a profile for this one. Try Dealroom → in 2023, initially targeted at least $300M at a $10B floor. Strong investor interest pushed the target above $20B within days.
Why now? DeepSeek's R-1 reasoning model, released in January 2025, demonstrated that frontier-level performance could be achieved at a fraction of typical training costs — challenging the assumption that scaling AI requires proportionally larger budgets. It has maintained a rapid release cadence since then, with open-source models competing directly against OpenAI and AnthropicDealroom has a profile for this one. Try Dealroom →.
For Tencent, which plans to more than double its AI spending to over 36B yuan ($5.2B) in 2026, and Alibaba, which recently consolidated its AI services into a single business unit, the investment would serve as a strategic hedge. The popularity of free, open-source models in China has made it difficult for larger players to monetise their own AI advances.
What could go wrong? DeepSeek generates minimal revenue. Its models are open-source and its chatbot is free, making traditional valuation metrics hard to apply. The $20B figure places it above the $18B that Moonshot AI, maker of the Kimi series of large language models, is seeking, but below MiniMaxDealroom has a profile for this one. Try Dealroom → and Zhipu AI, which have climbed to $30B+ and $50B+ respectively since listing in Hong Kong in January 2026.
There is also a geopolitical dimension. US lawmakers have proposed sanctions against Chinese AI firms, including DeepSeek, over allegations that they used “query-and-copy” techniques on American AI models. A bill from Rep. Bill HuizengaDealroom has a profile for this one. Try Dealroom → would direct the US government to identify and penalise such entities.
The signal: DeepSeek's fundraise marks a turning point for Chinese AI. A company that built its reputation on cost efficiency and open-source principles is now attracting the same scale of capital as its proprietary US rivals. If the round closes, it validates an alternative model for AI development — one where open-source distribution, not revenue, drives valuation. It also signals that China's biggest tech companies see backing frontier AI startups as essential, even when the path to monetisation remains unclear.
Sources:
The Information
Bloomberg
Reuters
South China Morning Post
PYMNTS
Economic Times
The Edge Malaysia
