The Chinese government is keeping a close eye on DeepSeek . The Chinese artificial intelligence (AI) startup is raising funds from investors backed by Xi Jinping's administration, in the country's race to achieve technological self-sufficiency.
According to sources familiar with the negotiations, some potential investors have valued DeepSeek at around US$50 billion, based on recent investment rounds.
China's National Artificial Intelligence Industry Investment Fund, a government fund that is one year old and has about US$8.8 billion in capital, has made progress in talks to invest in the next round, according to sources cited by the Wall Street Journal .
The AI company wants to establish a market valuation that signals its worth and provides a benchmark for granting stock options to employees, thus helping to retain top talent, some sources said.
Since the startup made a strong impact on investors in Silicon Valley and Wall Street in its early days, Beijing has considered DeepSeek a national champion in AI. The company has thus become an essential component of the Chinese plan to develop cutting-edge domestic companies in various technology fields.
The Chinese government fund's initiative to invest in the country's startup is part of a strategy to protect itself against US export controls and take the lead in spreading AI worldwide.
In April, DeepSeek launched its updated flagship model, called the V4. Although the new model was trained on Nvidia's cutting-edge chips, the company worked closely with Huawei and other domestic chip suppliers, signaling a shift in focus away from reliance on American suppliers.
Investors expect DeepSeek's new product to fuel a wave of AI implementation in China, as industries seek to automate more complex tasks, from office applications to factory settings.
DeepSeek's main models, including V4, are open source, meaning users can download and modify them for free. The company earns a small amount of revenue from selling access to its models, which run on its computing infrastructure.
Although DeepSeek's ability to rapidly increase its revenue is seen as uncertain, some investors believe that its connections to Chinese industry will eventually help it build a profitable business.
Other AI companies based in China already have high market valuations. Zhipu AI, listed on the Hong Kong Stock Exchange, currently has a market capitalization of around US$50 billion, while MiniMax is valued at US$30 billion.
In 2024, China raised the equivalent of about US$50 billion in the third tranche of its national semiconductor fund, known as the Big Fund, with the aim of strengthening the country's chip manufacturing capacity. Months later, the Big Fund helped create the AI (Artificial Intelligence) fund.
In the first few months after its global explosion and recognition from some of the world's leading investors, DeepSeek even refused external capital, including from government-linked funds, seeking to protect its decisions from external interference.
Instead, the company relied financially on the personal fortune of its founder and CEO, Liang Wenfeng, and the profits from his hedge fund. The startup was created in May 2023.
Now, the company is aligning itself with Beijing's call to strengthen China's resilience against pressure from the United States.
China is stepping up its oversight of AI and other strategic technologies. Recently, it advised some companies developing artificial intelligence not to accept American investments without government approval.
These restrictions followed measures adopted by the United States, which limit investments in Chinese advanced AI companies and block exports of chip technology to the country.
In April, the Chinese government blocked Meta's multi-billion dollar acquisition of AI startup Manus, which would have paid US$2 billion for the company. Based in Singapore, the company has Chinese roots.
