DeepSeek becomes China’s most valuable AI startup after over $7.4 billion fundraise

China’s DeepSeek raised more than $7.4 billion in its first round of fundraising to support its costly development of artificial intelligence.

Investors valued the company at more than $50 billion, people familiar with the matter said, making it the country’s most valuable AI startup.

Founder Liang Wenfeng, who held nearly 90% of DeepSeek before the financing round, invested around $3 billion in the biggest contribution of the fundraise, the people said.

Liang has retained control of the company via an unusual arrangement where most external backers put their money into a limited partnership that he manages, instead of investing directly into the business, some of the people said. Another requirement from the entrepreneur locks investors into holding their stakes for five years, the people added.

China’s National Artificial Intelligence Industry Investment Fund, a government-backed fund set up early last year, invested around $150 million directly into DeepSeek, the people said. That is significantly scaled down from its initial plans, which at some point included leading the round, they said.

The Information had earlier reported on the deal. DeepSeek and China’s AI fund didn’t immediately respond to requests for comment.

The Hangzhou-based AI lab has been seen as one of the front-runners in Beijing’s AI race with the U.S. ever since it sent shockwaves through Silicon Valley and Wall Street more than a year ago with a powerful, lower-cost model. The buzz has spurred faster AI adoption in China and boosted investor appetite for the country’s homegrown startups.

DeepSeek has also aligned itself with Beijing’s goal of becoming technologically self-sufficient. Over the past year, the startup has helped Chinese chip companies including Huawei make their products more capable of running powerful AI models.

According to people familiar with the matter, Liang has recently promised investors that his lab would continue to pursue artificial general intelligence—which can theoretically match or beat human thinking—and develop open-source technology.

DeepSeek plans to use the new capital to advance research-and-development as well as to expand computing infrastructure, some of the people said.

With U.S. trade restrictions curbing China’s access to high-end computing chips needed to develop AI, DeepSeek is likely also hoping to secure more domestic computing power.

Some investors have pushed the startup to explore more ways to charge users for its products, the people said. DeepSeek is beefing up teams focused on developing agentic AI tools-software capable of automating complex work-that could open up future revenue streams, some of the people said.

For now, local AI startups can hardly hope to match the funding firepower of many firms in the U.S. Even with the cash infusion, DeepSeek’s valuation is still a fraction of the astronomical market values commanded by leading American labs such as OpenAI and Anthropic.

Write to Raffaele Huang at raffaele.huang@wsj.com and Tracy Qu at tracy.qu@wsj.com