DeepSeek is on the verge of a significant milestone in its short corporate life, with its first external funding round poised to value the Chinese artificial intelligence start-up at approximately $45 billion (£33 billion), according to people familiar with the negotiations.

The company, which has captured global attention with its high-performance AI models, is reportedly in talks with the China Integrated Circuit Industry Investment Fund, widely known as the "Big Fund," which is expected to lead the round. Tencent Holdings and Alibaba Group are also said to be considering participation, reflecting a broad wave of state and corporate interest in DeepSeek's technology.

Key Facts

• DeepSeek's first external funding round could value the company at around $45 billion.
• China's Big Fund, the country's largest state-backed semiconductor investment vehicle, is in talks to lead the round.
• Tencent Holdings and Alibaba Group have also held talks about joining the investment.
• The valuation has climbed rapidly from an initial target of at least $10 billion a few weeks ago to about $20 billion in late April, and now around $45 billion.
• DeepSeek remains focused on developing frontier AI models rather than broad commercialisation, unlike domestic rivals including Moonshot and Zhipu, the latter valued near $52 billion.
• DeepSeek's latest V4 model is optimised for inference on Huawei's Ascend 950PR chips, a boost for China's tech self-sufficiency drive.

A Rapidly Rising Valuation

The negotiation over DeepSeek's valuation has been unusually fast-moving, even by the standards of the white-hot AI sector. When the company first opened discussions with potential investors a few weeks ago, it reportedly sought a minimum valuation of $10 billion. By late April, that figure had already climbed to $20 billion. The latest reports suggest the round could now be priced at $45 billion or more, marking a more than fourfold increase in just a short period.

That dramatic escalation reflects a broader trend in AI investing, where a small number of frontier laboratories have been able to command enormous valuations based on their perceived technological lead. For DeepSeek, the increase also signals that existing and prospective backers are willing to pay a premium for access to a company that has repeatedly surprised the industry with its model efficiency and performance.

The funding round is particularly notable because it is DeepSeek's first external capital raise. The company has historically been regarded as a research-driven operation, financed largely by its founder and related entities, rather than a startup aggressively seeking venture capital. Entering the external funding market at such a high valuation is therefore both a validation of its technical achievements and a test of whether it can maintain momentum as it scales.

The Big Fund's Role

The reported lead investor in the round, the China Integrated Circuit Industry Investment Fund, is the country's largest state-backed semiconductor investment vehicle. It was established to support the development of China's chip industry and has played a central role in financing key domestic players. Among its most significant portfolio companies are contract chipmaker SMIC and memory manufacturer YMTC, both of which are strategically important to Beijing's drive for technological self-reliance.

Big Fund's involvement in DeepSeek would mark a notable expansion of its focus beyond traditional semiconductor manufacturing and into the AI model layer. This move would be consistent with the Chinese government's broader push to create an integrated ecosystem around AI, linking hardware, software, and model development into a cohesive national capability. The government has urged domestic tech companies to cooperate more closely, rather than duplicating effort, in order to build a competitive alternative to the US-led AI stack.

State support could give DeepSeek access not only to capital but also to essential computing infrastructure and regulatory goodwill. In a sector where cutting-edge chips are scarce due to US export controls, having the backing of a powerful state investment vehicle could open doors to domestic chip supply and priority access to national computing resources. It also gives DeepSeek a strategic shield in a geopolitical environment that has made advanced AI development increasingly sensitive.

Strategic Backing from Tencent and Alibaba

Reports that Tencent and Alibaba are in talks to participate in DeepSeek's round add another layer of significance. Both companies are among China's largest technology conglomerates, and each has invested heavily in artificial intelligence, including through their own cloud platforms and in-house model development. Alibaba, in particular, has built an extensive AI portfolio through its Qwen family of models, while Tencent has pursued a mix of in-house AI research and strategic investments.

If these companies commit capital to DeepSeek, it could signal a shift toward a more collaborative posture in China's AI industry. Previously, major tech firms have competed fiercely for market share in areas such as cloud computing, e-commerce, and social media. Backing a common rival like DeepSeek might seem counterintuitive for Alibaba, which competes with DeepSeek in the large language model space. However, the pressure to match the United States in frontier AI may be pushing even the largest Chinese companies to pool resources and share in the upside of a domestic champion.

The participation of Tencent and Alibaba would also prove valuable to DeepSeek in terms of distribution and commercial reach. While DeepSeek has gained enormous visibility as a research lab, turning that reputation into revenue requires access to enterprise customers, cloud infrastructure, and integration channels. Both Tencent and Alibaba can provide those assets through their respective ecosystems, making them attractive partners beyond their financial contributions.

Investor Sentiment and Competitive Landscape

DeepSeek's positioning differs from that of some of its domestic rivals. The company is reportedly focused on developing frontier models, aiming to push the state of the art in artificial intelligence, rather than pursuing broad commercialisation in the near term. This is a deliberate strategy that appeals to investors who believe the ultimate value in AI will accrue to those who create the most capable fundamental models.

Chinese rivals such as Moonshot AI and Zhipu have taken different paths. Zhipu, which is listed in Hong Kong, is currently valued at around $52 billion and has been aggressive in deploying its models across business applications. Moonshot has also sought to commercialise its technology through various products. DeepSeek's narrower focus on research and model quality has helped it stand out in the global AI conversation, particularly after its releases demonstrated that advanced models can be trained and run with greater efficiency than many in the industry believed possible.

Investors are betting that DeepSeek's technical reputation will translate into long-term influence, even if the company has not yet prioritised monetisation. The valuation gap between DeepSeek and Zhipu has narrowed considerably, and if the current round is completed at $45 billion, DeepSeek will rank among the most valuable AI companies in China. That would be a striking result for a company that, until recently, had not accepted outside funding.

Huawei Optimisation and China's Tech Independence

One of the most strategically important aspects of DeepSeek's recent activity is its partnership with Huawei. At the launch of its latest V4 model, DeepSeek said the software had been optimised to run inference on Huawei's Ascend 950PR chips. This is widely seen as a significant boost for China's broader technology independence efforts, as it demonstrates that domestic AI models can run on domestic hardware.

Huawei has overtaken Nvidia in terms of market share in China, largely because Nvidia's most advanced products remain unavailable in the country. US export restrictions have prevented Nvidia from selling its cutting-edge chips to Chinese customers, while Chinese regulators have also made it difficult for domestic buyers to access certain foreign technologies. Huawei's Ascend series has emerged as the primary domestic alternative, and DeepSeek's optimisation work adds credibility to that platform.

The tie-up between DeepSeek and Huawei is part of a larger pattern in the Chinese technology industry. Government policy is increasingly focused on ensuring that every layer of the AI stack, from chips to models to applications, can be supplied domestically. By optimising its model for Huawei hardware, DeepSeek is helping to close the gap between Chinese and American AI ecosystems, even as the geopolitical landscape remains turbulent.

For DeepSeek, the relationship with Huawei also offers practical benefits. Access to domestic chips is essential in a climate where reliance on foreign semiconductors is risky. Developing strong optimisations for Huawei's architecture could give DeepSeek a competitive advantage in the Chinese market, where customers expect AI models to perform well on local infrastructure. It also strengthens DeepSeek's claim to be a national champion in a strategically critical sector.

The rapid escalation in DeepSeek's valuation illustrates the enormous confidence investors have in its ability to remain at the forefront of AI research while also helping to build the technological infrastructure that China believes is necessary for the future. As the funding round continues to take shape, the combination of state investment, corporate backing, and advanced chip collaboration could position DeepSeek as a central player in the next stage of China's AI development.

Source: Silicon UK News