Tencent and Alibaba eye DeepSeek stake at over $20 billion valuation

Wednesday 22 April 2026 - 17:00

By: Dakir Madiha

Tencent and Alibaba eye DeepSeek stake at over $20 billion valuation

Tencent and Alibaba are in talks to invest in AI startup DeepSeek at a valuation exceeding $20 billion, marking a sharp increase from earlier expectations and signaling rising competition for strategic positions in China’s AI sector.

The discussions would represent the first external funding round for DeepSeek, which was founded in 2023 in Hangzhou by Liang Wenfeng. Until now, the company has relied on financial backing from its parent entity, High-Flyer Capital Management, while declining offers from venture capital firms and technology groups. The potential deal would mark a shift toward broader capital market engagement.

Initial reports indicated that DeepSeek sought to raise at least $300 million at a valuation of around $10 billion. Within days, that figure doubled, with ongoing negotiations now targeting a valuation above $20 billion. The rapid escalation reflects heightened investor interest following the impact of DeepSeek’s R1 reasoning model, which gained attention for delivering competitive performance at lower development cost compared with Western systems.

The company’s technological advances have had measurable market effects. The release of its model contributed to sharp market reactions, including a significant drop in the market value of Nvidia and broader declines across major US equity indices. The episode underscored the disruptive potential of cost efficient AI development.

Several factors appear to be driving DeepSeek’s openness to outside investment. Training costs for its upcoming V4 model are estimated to exceed $500 million per cycle, increasing the need for external capital. The company has also faced talent retention challenges, with senior researchers reportedly moving to competitors such as Xiaomi and ByteDance.

Strategic alignment with potential investors further supports the discussions. Tencent has encouraged integration of DeepSeek models across its ecosystem, while Alibaba has invested in infrastructure linked to future deployments, including chip procurement for upcoming systems. At the same time, DeepSeek has not released a new model in several months, raising questions about development timelines.

If finalized, the investment would position Tencent and Alibaba at the center of one of China’s most closely watched AI ventures. It would also highlight the increasing role of large technology groups in shaping the next phase of global competition in artificial intelligence.