- State-backed chip fund leads talks as investors scramble for access
- Startup’s valuation reportedly climbs to $45 billion amid AI frenzy
Chinese AI startup DeepSeek is nearing the close of its first funding round, in a deal that could become the largest debut financing in China’s large-language-model sector, according to people familiar with the matter.
Financial magazine Caijing reported that China’s state-backed National Integrated Circuit Industry Investment Fund, known as the “Big Fund,” is leading the round, alongside several private investment firms still in negotiations.
The fundraising marks the first time DeepSeek has opened itself to outside capital since its inception three years ago. Investor interest has surged since April, turning the company into one of China’s most sought-after AI assets.
“Everyone wants access, but nobody can guarantee they’ll get in,” one person close to the transaction was quoted as saying in the Caijing story.
Allocations subject to change
The person added that the final investor list had largely been settled by the end of May, though allocations and participation could still change before closing.
Media reports on May 22 said the latest round had expanded to 70 billion yuan ($10.33 billion), with a pre-money valuation of about $45 billion.
Just a month earlier, the company was reportedly valued at around $20 billion.
If completed, the financing would rank as the largest first funding round for a Chinese foundation-model company.
Initial hesitation
Several investors initially viewed the deal as largely reserved for state-backed capital. One investor familiar with DeepSeek management said his firm stayed away at first because the fundraising size had already become “too big,” limiting potential returns for private funds.
That changed after China’s May Day holiday, when DeepSeek began opening discussions to more market-oriented investors, including firms such as Monolith Capital and Hillhouse Capital, according to people familiar with the talks.
Rumors had circulated in China’s venture capital circles that DeepSeek founder Liang Wenfeng personally opened an email inbox and asked investment firms to introduce themselves and explain their understanding of AI before seeking access to the deal.
Caijing said the rumor was later denied, though investors familiar with the process said smaller and lesser-known funds without direct connections to Liang had little chance of securing allocations.
Competition for allocations has become so intense that some investors reportedly explored using special purpose vehicles, or SPVs, to pool capital from limited partners that otherwise lacked direct access to the deal.
One person close to the talks said lesser-known investors could gain exposure through those structures, though they would also face additional management and channel fees.
SPV structures have become increasingly common in China’s private markets, especially for highly competitive deals.
“Only the hottest transactions get handled this way,” one dealmaker said. “Even after paying extra fees, investors still think they can make money at today’s valuation if the company eventually goes public.”
Disproportionate effort
Not all investors are convinced. Some funds view DeepSeek’s valuation as too high and question whether the time and cost required to pursue a small allocation justify the potential returns.
Some said the process involved disproportionate effort for a potentially very small stake. “One tiny stake through several layers of intermediaries doesn’t necessarily mean much,” one investment partner said, speaking on condition of anonymity. “It’s better to back opportunities where you can secure meaningful ownership.”
The fundraising has also drawn interest from major Chinese technology and industrial groups.
CATL is reportedly exploring participation, according to The Information, in a move that would tie AI infrastructure growth more closely to energy and power supply chains.
Tencent yes, Alibaba maybe not?
Both Tencent Holdings and Alibaba Group have also been linked to the talks, though Alibaba has publicly denied strong interest.
Several AI investors said Tencent may have stronger strategic incentives to invest because its Hunyuan model still trails leading domestic competitors.
In comparison, Alibaba has already built a broader in-house AI stack spanning models, chips and cloud infrastructure through products such as Qwen and Zhenwu.
