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China’s biggest state-backed semiconductor investment vehicle is in talks to lead the financing of DeepSeek’s first fundraising that could value the AI group at about $45bn.
The China Integrated Circuit Industry Investment Fund, typically referred to as the “Big Fund”, is seeking to lead the investment into DeepSeek, according to four people with knowledge of the discussions.
Other investors still in talks for a stake include Chinese tech giant Tencent, although the final line-up has not yet been finalised.
DeepSeek shot to prominence in January 2025 following the release of R1, a powerful open-source large language model, which it said was trained on a fraction of the computing power of models developed by American rivals such as OpenAI.
The valuation of DeepSeek has increased significantly from $20bn when it started the fundraising talks only weeks ago, as investors strive to bet on the lab’s potential despite its lack of focus on commercialisation.
Liang Wenfeng, the billionaire founder of the Hangzhou-based start-up, could also invest personally in this round, two of the people said. He controls 89.5 per cent of DeepSeek through personal holdings and affiliated groups, according to company filings.
Backing from China’s most strategic government fund in semiconductors would reinforce DeepSeek’s position as a leader in the country’s frontier AI model development, as well as promote a Chinese ecosystem comprising domestic models, software and chips.
China has launched three phases of the state-backed “Big Fund” to aid President Xi Jinping’s self-sufficiency drive in the face of US efforts to restrict the country’s access to technology such as advanced semiconductor production equipment.
The fund assembled $47bn from the finance ministry, local government and state-owned banks in its third round of funding in 2024, with a mandate to invest in semiconductor equipment and materials. It has not publicly backed any of China’s other LLM players.
The Big Fund has bankrolled key companies in China’s semiconductor industry including Semiconductor Manufacturing International Corporation, the country’s largest and most advanced foundry, as well as Yangtze Memory Technologies Corp., China’s leading memory chipmaker.
DeepSeek said in its latest V4 model launch that it had been optimised to run inference — the computation that LLMs use to generate responses — on Huawei’s Ascend 950PR chips.
Huawei’s AI chip sales have surged this year as it overtook Nvidia in China, the world’s largest AI chip supplier, whose advanced products are still banned from entering the country, the FT reported last week.
Still, the overall amount of AI chips that China produces is only a fraction of that from the US and these processors are at least two generations behind.
To catch up, Beijing is counting on its tech companies — from chipmakers to model builders — to work closely together. The aim is to develop an ecosystem that could sustain China’s competitiveness in AI despite US export controls tightening.
Such an ecosystem could pose a danger to US dominance globally, according to Nvidia chief Jensen Huang.
“The day that DeepSeek comes out on Huawei first, that is a horrible outcome for our nation,” he said in a recent interview with podcaster Dwarkesh Patel. It could lead to a scenario where “AI models around the world are developed and they run best on non-American hardware”, he added.
Since it came to global attention last year DeepSeek has focused on training frontier AI models, rather than developing a commercial business selling AI to companies or growing its consumer AI chatbot.
DeepSeek’s coding capability is among the best in China, where peers such as Zhipu and Moonshot expect revenues to keep surging, according to one of the people considering an investment. Hong Kong-listed Zhipu has a market value of $52bn.
Liang initially wanted to raise a nominal sum to assign a value to DeepSeek’s options in a bid to stop his researchers being poached by competitors offering huge packages, the FT reported last month. Stock options typically make up most of an AI researcher’s remuneration.
Now that DeepSeek’s valuation has risen significantly, Liang might consider raising more money to boost a war chest for future investment in computing capacity, the person said.
DeepSeek, the Big Fund and Tencent did not immediately respond to requests for comment.
Additional reporting by Arjun Neil Alim in Hong Kong. Data visualisation by Haohsiang Ko in Hong Kong
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