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DeepSeek is raising outside capital for the first time, and the terms are accelerating fast. Tencent Holdings and Alibaba Group are in active talks to invest at a valuation exceeding $20 billion, according to The Information, citing four people with knowledge of the discussions. Five days ago, DeepSeek was seeking a minimum $10 billion floor. The doubling reflects a scramble among Chinese tech giants to secure influence over the country’s most consequential AI lab before pricing moves further.

The Numbers

• Target raise: at least $300 million
• Valuation: $20 billion-plus (up from $10 billion+ floated April 17)
• Comparable: Moonshot AI’s pending round, benchmarked at approximately $18 billion
• Original funding: $5.6 million from founder Liang Wenfeng’s hedge fund, High-Flyer Capital Management

The deal has not closed. Valuation and total capital remain subject to change. U.S. venture capitalists are expected to pass given DeepSeek’s Chinese ownership structure, limiting the investor pool to domestic and regional participants.

Why the Premium Despite Falling Usage

DeepSeek’s global user share has dropped from approximately 10% to 3.3% in under a year. The valuation is not a measure of current product traction. Investors are underwriting three things simultaneously: model development talent, potential control over next-generation AI infrastructure, and a strategic positioning inside China’s consolidating AI market before the field narrows.

Tencent and Alibaba are treating the investment as a vendor relationship and a competitive hedge in one. Both companies have their own foundation model programmes; backing DeepSeek gives them influence over model direction and early access to capabilities before they are publicly distributed.

Scaling Costs Force the Move

DeepSeek was founded as a capital-light research operation. Its flagship R1 and V3 models earned a reputation for delivering frontier-class performance at a fraction of Western development costs. That efficiency narrative has now run into a wall: deploying and scaling those models at production demand levels requires infrastructure investment that Liang Wenfeng’s hedge fund cannot cover alone.

U.S. export controls on NVIDIA chips add a supply constraint on top of the cost pressure. DeepSeek has begun exploring alternative chip ecosystems, including Huawei’s Ascend line, but both routes require capital outlays that external funding is intended to address.

What Comes Next

If finalised at $20 billion, the deal would set a new reference valuation for Chinese AI foundation model companies — placing DeepSeek above Moonshot AI ($18 billion) and establishing a pricing benchmark for subsequent rounds across the sector. State-backed investors are also expected to participate alongside Tencent and Alibaba, per reports.