In a significant development for China’s artificial intelligence sector, Tencent Holdings Ltd. and Alibaba Group Holding Ltd. are in talks to participate in the first funding round of AI startup DeepSeek.
Tencent has proposed acquiring up to 20% stake in DeepSeek as part of the deal. However, the startup is not willing to give up such a large share of control, according to a person familiar with the matter. Discussions are ongoing and no final agreement has been reached. The valuation is being benchmarked against publicly traded rivals like MiniMax Group Inc., estimated at around $40 billion. Alibaba is also part of the discussions, though its exact proposal remains unclear.
Both Tencent and Alibaba are competing to lead China’s AI space, alongside startups such as Moonshot and MiniMax. They are also major cloud service providers, similar to Microsoft Corp. and Amazon.com Inc., and are looking to supply computing infrastructure to emerging AI firms that require data centres to operate their platforms. Both companies are already investors in MiniMax, which develops the M2 large language model.
The talks remain uncertain, with no guarantee of a deal or final valuation. Earlier reports suggested DeepSeek is aiming to raise more than $300 million at a valuation of at least $20 billion. Representatives from DeepSeek, Alibaba, and Tencent have not commented. Shares of Alibaba and Tencent declined in Hong Kong on Thursday.
DeepSeek is owned by hedge fund Zhejiang High-Flyer Asset Management. Its cofounder Liang Wenfeng launched the startup in 2023. The company gained attention after releasing a breakthrough model in January 2025, delivering performance comparable to US competitors despite limited access to global talent and advanced semiconductor technology.
The startup has continued to release new models quickly and stands out by offering low-cost, open source alternatives compared to companies like OpenAI and Anthropic PBC.
Alibaba remains active in AI development, recently launching a model capable of generating 3D environments and interactive videos. The company also reorganised its AI operations into a single business unit last month. Tencent has announced plans to double its AI investments to more than 36 billion yuan ($5.2 billion) this year.
DeepSeek is also expanding into agentic AI following the rise of OpenClaw, focusing on software that can perform tasks without human intervention. The company has posted more than a dozen job openings for agent-related roles and is seeking access to large-scale computing power, which Alibaba and Tencent can provide to support its growth.
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