Chinese AI startup DeepSeek is pursuing a valuation exceeding $20 billion as Tencent Holdings and Alibaba Group engage in discussions about potential investments, according to a report from The Information citing four sources familiar with the talks. This marks the first time DeepSeek, which is owned by hedge fund High-Flyer Capital Management, has sought external funding. The fundraising target has escalated rapidly from an initial goal of at least $300 million at a $10 billion valuation reported just days earlier, reflecting surging investor interest.
The negotiations are ongoing and terms, including the final valuation and amount raised, could still change. Some U.S. venture capital firms may exhibit caution due to DeepSeek's status as a Chinese startup. The company has previously limited its engagement with U.S. chipmakers, notably not sharing its flagship model for performance tuning with them. Reports also indicate one of DeepSeek's newer models was trained on Nvidia's most advanced chip, which is banned for export to China.
Nvidia CEO Jensen Huang expressed significant concern about the geopolitical implications of DeepSeek's development. On the Dwarkesh Podcast, Huang warned it would be "a horrible outcome" for the United States if DeepSeek optimized its AI models to run on Huawei's Ascend chips instead of American hardware. He argued that if AI models diffuse globally using Chinese standards and technology, China "will become superior to" the U.S. in the AI race.
Despite the geopolitical tension, a significant AI funding surge is underway. On the same day, data infrastructure company Vast Data announced a $1 billion funding round at a $30 billion valuation, with Nvidia participating as an investor. This round more than tripled Vast's 2023 valuation of $9.1 billion. Drive Capital's Chris Olsen noted, "The scale and speed of AI adoption are creating a new class of infrastructure company," and identified Vast as a leader in this category.
Globally, AI companies have raised $280.5 billion in 2026 alone, with over $170 billion directed toward OpenAI, Anthropic, and xAI. This investment frenzy underscores the immense capital required for generative AI, where operational costs are substantial due to expensive GPU hardware and high electricity consumption for processing billions of daily requests.
