Tencent and Alibaba are in talks to invest in the Chinese artificial intelligence (AI) startup as it begins its first round of fundraising, The Information reported Wednesday (April 22), citing four sources with knowledge of the discussions.
One of those sources told the publication that DeepSeek hopes to raise funding at a valuation of more than $20 billion, following strong interest among investors. The Information had reported last week that the company had begun talks to raise its first outside capital, hoping to bring in at least $300 million at a valuation of at least $10 billion.
The report adds that DeepSeek’s focus on offering open-source technology over making money has led to some debate about how it should be valued. The $20 billion is slightly higher than the $18 billion that Moonshot AI, the Chinese startup behind the Kimi series of large-language models, is seeking with its new funding round.
Meanwhile, two of DeepSeek’s competitors, MiniMax and Zhipu, both went public in Hong Kong in January at a valuation of less than $10 billion but have since seen their values climb to a respective $30 billion-plus and $50 billion-plus, The Information added.
But unlike those companies, DeekSeek hasn’t generated much revenue, as its models are open-source and its chatbot is free for consumers to use.
PYMNTS wrote earlier this year about research by DeepSeek showing a new way to train large language models that allows performance to improve without a proportional uptick in training costs. This goes against one of the main assumptions that has guided the way the AI sector has scaled in the last several years, the report said.
“If approaches like DeepSeek’s prove reliable beyond research settings, they could alter the economics of AI deployment in sectors that depend on cost discipline, including commerce, payments, and enterprise software,” PYMNTS added.
“Lower training costs make it easier to build and maintain specialized models tailored to specific workflows, rather than relying on generalized systems that are expensive to update.”
Meanwhile, DeepSeek and other Chinese AI companies could face sanctions from the U.S. government following allegations that they copied American AI models.
As Bloomberg News reported last week, Rep. Bill Huizenga (R-Mich.) has proposed a bill that would direct the government to identify and sanction entities in China and Russia engaged in using improper “query-and-copy” techniques on American AI models.