DeepSeek's $20 bln tag sends the wrong signal

Tencent Holdings

24/04/2026 01:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own. Updates to include latest reported valuation target from Bloomberg in the first paragraph. Refiles to fix extraneous link.

By Robyn Mak

HONG KONG, April 23 (Reuters Breakingviews) - DeepSeek's debut funding round reveals some growing pains in China's artificial intelligence industry. The startup is in talks with its top rivals Alibaba 9988.HK, Tencent 0700.HK and others to raise $300 million at a valuation of at least $20 billion, The Information reported on Wednesday, citing sources. Nothing has been confirmed, and the final figure may be closer to around $40 billion, per a subsequent Bloomberg report on Thursday. That's far below the private price tag of $852 billion for OpenAI or $380 billion for Anthropic, suggesting founder Liang Wenfeng still favours innovation over profits.

The secretive startup took the world by storm with its groundbreaking low-cost, powerful large language model over a year ago. But it hasn't released a major follow-up since. At the same time, competitive offerings from $327 billion Alibaba, $37 billion MiniMax 0100.HK and others have flooded the market, capitalising on the global craze for digital assistants and coding agents. Reports of DeepSeek struggling with key staff defections and major outages for its popular chatbot have added to speculation that Liang's pursuit of AI breakthroughs is running up against some hard realities.

Tapping external investors seems to confirm some of this, even though DeepSeek's tepid valuation suggests Liang isn't trying to push the envelope. It is selling less than 3% of its equity and doesn't actually need the cash, according to the South China Morning Post, citing sources. The AI lab is owned and funded by Liang's quantitative hedge fund, which oversees more than 70 billion yuan ($10.3 billion) in assets and delivered an impressive 57% return in 2025, Bloomberg reported. Still, DeepSeek does have to grapple with the intensifying talent shortage, computing shortfall and U.S. chip export controls impacting its industry.

Raising funds will help DeepSeek set a private-market valuation for employee stock compensation to retain researchers and engineers. And turning rivals like Alibaba and Tencent who are investing heavily in building out AI infrastructure into strategic investors might also ease hardware shortages. For Liang, giving up some equity may be a small price to pay. Whether DeepSeek is keeping pace with its U.S. rivals in frontier technology will be better determined by how the Chinese AI lab's next model performs.

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CONTEXT NEWS

China's Tencent and Alibaba are in discussions to invest in artificial intelligence startup DeepSeek at a valuation of more than $20 billion, The Information reported on April 22, citing unnamed people familiar with the matter.

DeepSeek, owned by Chinese hedge fund High-Flyer Capital Management, initially targeted to raise at least $300 million at a valuation of at least $10 billion, according to the report.

Market values for DeepSeek's listed Chinese rivals have surged https://www.reuters.com/graphics/BRV-BRV/zdvxgjxljpx/chart.png

(Editing by Una Galani; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on MAK/ robyn.mak@thomsonreuters.com))