China's AI race is heating up again—and this time, Big Tech may be backing the next contender. Tencent Holding Ltd. (OTC:TCEHY) and Alibaba Group Holding Limited (NYSE:BABA) (NYSE:BABAF) are in talks to invest in DeepSeek, as the fast-rising company explores its first-ever external funding round at a valuation that could exceed $20 billion.

That's a sharp jump from earlier discussions that pegged the raise at around $10 billion—suggesting investor demand is accelerating quickly, the Information reported.

A New AI Contender Emerges

DeepSeek isn't a typical startup.

The company is backed by High-Flyer Capital Management, marking a rare crossover where quantitative finance meets large-scale AI development.

DeepSeek has gained attention for building competitive AI models at dramatically lower cost than Western rivals, with some estimates suggesting its systems can run at a fraction of the expense.

That cost angle may be key.

Why Big Tech Is Circling

For Tencent and Alibaba, the interest goes beyond financial returns.

Both companies are racing to strengthen their AI ecosystems amid intensifying competition—domestically and globally. Backing DeepSeek could offer:

  • Access to emerging model capabilities
  • A faster route to scaling AI offerings
  • A hedge against falling behind in the next phase of the AI cycle

Valuation Momentum Builds

The rapid shift in valuation expectations—from $10 billion to $20 billion-plus—signals more than just hype.

It points to a broader trend: AI capital is still chasing the next breakthrough, especially in markets where cost efficiency and scalability could reshape the competitive landscape.

The Bigger Picture

This isn't just another funding round.

If talks progress, it would mark a moment where China's established tech giants align with a newer AI player—potentially accelerating the country's push to stay competitive in the global AI race.

And for DeepSeek, the message is clear: the spotlight is only getting brighter.

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