DeepSeek: Tencent and Alibaba Talks at $20 Billion Valuation

China's DeepSeek, the AI lab that stunned the world last year with a low-cost model that matched the US frontier, is in talks to raise outside capital for the first time, with Tencent Holdings and Alibaba Group leading the discussions, according to The Information.

Target valuation: more than $20 billion

Initial raise size: at least $300 million

The Details

DeepSeek is owned by Chinese hedge fund High-Flyer Capital Management. It has built and shipped models on a fraction of US lab budgets, including V3 (released last year), R1 (the reasoning model that briefly knocked $1 trillion off Nvidia's market cap in January 2026), and now V4, which is launching this week.

DeepSeek has been profitable since inception, funded entirely from High-Flyer's trading book. The team is small, the compute setup is unconventional, and until now there was no need for outside money.

That has changed. Training V4 and the agentic systems DeepSeek is now planning requires order-of-magnitude more compute than its earlier models. Initial discussions started at a $10 billion valuation and a $300 million raise. Investor demand pushed the number to over $20 billion in days.

Bidders: Tencent and Alibaba lead the table. Both are large existing AI investors, both run their own foundation models (Hunyuan and Qwen), and both have data center capacity that DeepSeek can use. Neither company has commented on the talks. Reuters has not independently verified the report. Alibaba's US-listed shares rose 1.3% in premarket trading on the news.

Why $20 billion in 18 months

DeepSeek raised zero outside capital before this round. Now it is in talks at a valuation that puts it ahead of every Western AI startup outside OpenAI and Anthropic. The math is simple. R1 demonstrated that frontier-quality models can be trained at single-digit percentages of the cost OpenAI and Google reported. V4, which ships this week, is the first major model designed from the start to run on Huawei Ascend chips. Both points reduce the strategic dependency on US compute and US capital.

For Tencent and Alibaba, an early stake at $20 billion is cheap insurance. If DeepSeek becomes the dominant Chinese open-weight provider, the BAT players want to be inside the cap table, not buying seats from secondaries later. For DeepSeek, the cash buys compute and team scaling without giving up control.

The talks are still live. The amount and the valuation could move further before signing.

Sources: DealStreet Asia, The Information, Reuters