China’s DeepSeek chases $7B as AI funding and IPO fever collide

Global markets are deep in an AI-driven funding boom, and China is now firmly in the spotlight. One of the country’s fastest-rising AI players, DeepSeek, is reportedly close to securing more than $7 billion in fresh capital, just as SpaceX prepares what could be the largest IPO in history. At the same time, investors are starting to ask whether this wave of AI optimism is turning into a bubble.

DeepSeek’s $7 billion funding push

DeepSeek is a young Chinese AI company founded in 2023 that has quickly become a flagship for the country’s ambitions in advanced AI models. It’s best known for building large language models that rival leading Western systems, but at a fraction of the cost and with a strong commitment to open source.

According to people familiar with the talks, DeepSeek is close to finalizing a funding round of about 50 billion yuan (roughly $7.4 billion). If completed, it would be one of the largest startup financings ever seen in China’s tech sector.

Who is backing DeepSeek?

The investor list shows how strategically important DeepSeek has become inside China’s AI ecosystem. The round reportedly includes:

• Tencent – one of China’s biggest internet and cloud companies, and a key player in AI infrastructure and consumer applications.
• CATL – the world’s largest EV battery maker, signaling how AI is now seen as critical infrastructure across industries, not just in software.
• China’s national AI industry fund – a state-backed vehicle focused on accelerating the country’s AI capabilities.
• Founder Liang Wenfeng – who is also expected to participate, reinforcing confidence from inside the company.

The presence of a national AI fund highlights that DeepSeek is not just another startup; it’s part of a broader strategic push to reduce dependence on foreign AI technology and build domestic champions. For more background on how DeepSeek positions itself against U.S. rivals, see this deeper look at DeepSeek’s open-source model strategy.

DeepSeek’s strategy: research first, profits later

Despite the huge sums involved, DeepSeek is reportedly telling investors that it will prioritize “groundbreaking AI research” over quick commercialization. That means:

• Continuing to release powerful open-source models rather than locking everything behind paid APIs.
• Pushing toward artificial general intelligence (AGI) as a long-term goal, instead of focusing only on near-term enterprise use cases.
• Accepting that monetization may lag behind the pace of research and model releases.

This stance mirrors the early days of several Western AI labs, where the initial focus was on scientific breakthroughs and open releases, only later shifting toward revenue, cloud partnerships, and enterprise tools.

China’s broader AI and export strategy

DeepSeek’s rise is happening alongside a broader reshaping of China’s tech and export strategy. On the one hand, Chinese exports of higher-value products like machinery, EVs, and AI-related hardware are growing strongly, even as traditional trade tensions with the U.S. continue.

On the other hand, Washington is preparing new tariffs on dozens of countries over alleged forced labor, with China among those affected. Beijing has pushed back, insisting there is no forced labor and calling for trade disputes to be handled through dialogue. For now, economists expect the direct impact of these specific tariff changes on China’s overall export engine to be limited, but they add another layer of geopolitical risk around Chinese tech.

Within China, policymakers are making AI a top priority in their five-year plans, while also tightening rules on outbound investments, including for individuals. That could raise compliance hurdles for tech founders and investors moving money overseas, but it also nudges more capital to stay onshore and back domestic champions like DeepSeek.

AI funding meets mega IPOs: SpaceX enters the stage

DeepSeek’s raise isn’t happening in isolation. Globally, AI has become the central story for both private funding and public markets.

SpaceX has now formally filed for an IPO that could raise around $75 billion, which would make it the largest listing in history. For comparison:

• Saudi Aramco’s 2019 IPO raised about $29 billion.
• Alibaba’s 2014 IPO raised about $25 billion.

While SpaceX is best known for rockets and Starlink satellites, it is increasingly an AI-heavy company as well, from autonomous navigation to data processing and its own AI initiatives. The IPO is being structured in an unusually rigid way: Elon Musk plans to sell exactly 555,555,555 shares at a fixed price of $35 each, bypassing the usual price range negotiations with institutional investors.

Post-IPO, Musk is expected to retain about 84% of the voting power via super-voting shares, meaning anyone buying in will be effectively betting on his leadership with very little governance leverage.

Is this all turning into an AI bubble?

As money floods into AI—from DeepSeek’s multibillion-dollar round to SpaceX’s record IPO and a long list of chipmakers, cloud providers, and model labs raising capital—some veteran investors are sounding alarms.

Ray Dalio, founder of Bridgewater Associates, has warned that we are likely in an AI bubble that will eventually burst. His main concerns:

• A small slice of companies and individuals may capture enormous gains, while many others are left behind.
• Expectations for growth and profits in AI are becoming “parabolic,” and any guidance that isn’t explosive gets punished by markets (as seen with Broadcom’s recent selloff despite strong numbers).
• The social and political systems needed to manage the disruption from AI are not keeping pace.

We’re already seeing some early signs of this tension. Chipmakers and AI infrastructure stocks have soared, but any hint of slower growth or supply constraints can trigger sharp corrections. At the same time, alternative speculative assets like Bitcoin have struggled, suggesting that the “risk-on” appetite may be rotating into AI equities and away from other corners of the market.

China’s AI race goes beyond models

DeepSeek is part of a much larger Chinese AI push that stretches from cloud platforms and chips to robotics and healthcare. Robotics firms like Fourier Intelligence and others are lining up for IPOs in Hong Kong and onshore exchanges, hoping to ride the same wave of enthusiasm that has powered AI chip and model makers to huge first-day pops.

At the same time, China is rapidly applying AI in real-world sectors such as medicine, diagnostics, and hospital automation. The country’s healthcare system is becoming a proving ground for AI-assisted care, as explored in this deep dive into China’s AI-powered healthcare revolution.

All of this reinforces a key point: China is no longer just a fast follower in AI. It is building its own stack of models, chips, applications, and capital markets—and DeepSeek’s funding round is a clear signal that Beijing and major private players want a homegrown alternative to U.S.-centric AI platforms.

What to watch next

The coming months will be crucial for understanding where this AI funding cycle goes. Key questions include:

• DeepSeek’s valuation and terms – How aggressively is the company priced, and how much control do founders and state-linked funds retain?
• SpaceX IPO demand – Can markets absorb a $75 billion offering at a fixed price, especially with such concentrated voting power in Musk’s hands?
• Regulation and tariffs – Do U.S. and Chinese policymakers escalate or stabilize trade and tech tensions, particularly around AI and advanced chips?
• Market rotation – If AI stocks stumble, does capital move back into other risk assets like crypto, or does it retreat to the safety of the dollar and bonds?

For now, DeepSeek’s looming mega-round and SpaceX’s blockbuster IPO plan show that the AI funding frenzy is still very much alive. Whether this marks a sustainable new phase of technological investment—or the late stages of a bubble—will depend on how quickly these AI giants can turn breakthroughs into durable, profitable businesses.