Whale Lab: DeepSeek and Alibaba’s “fundraising” negotiations failed to reach an agreement

According to WhaleAce Lab’s May 9 report, DeepSeek’s external financing program launched in April failed to reach an agreement in negotiations with Alibaba. The core of the disagreement was that Alibaba’s demand for AI ecosystem integration conflicted with DeepSeek’s position of maintaining technical independence. According to an early May report by The Financial Times, DeepSeek’s final valuation for this round of financing is expected to land at approximately $45 billion.

Background of the stalled talks: conflict between Alibaba’s closed-loop ecosystem push and DeepSeek’s independence principle

According to WhaleAce Lab’s report, multiple sources close to the deal said Alibaba has a strong desire to integrate in a closed-loop AI ecosystem, which fundamentally contradicts DeepSeek’s positioning as an independent model company.

WhaleAce Lab reported that in March 2026, Alibaba established the Alibaba Token Hub, with five business units under it, including Tongyi Labs, the Qianwen business unit, and the Wukong business unit. The setup covers a complete layout from foundational model R&D to B-end and C-end AI applications. In early May 2026, Alibaba released a unified AI digital humanoid image, “Qianwen Xiaojiaowo,” and deeply integrated the Qianwen AI assistant into core products such as Taobao, Amap, Tmall, Feishu, and Alipay.

In WhaleAce Lab’s report, Jiang Yi, a partner at Hengye Capital Management, said that for DeepSeek, the best financing proposal is an “offer with the fewest add-on conditions.” WhaleAce Lab sent a confirmation request regarding the above to the Alibaba Group; as of the time of publication, it had not received a reply.

DeepSeek’s financing size, valuation, and strategic goals

Previously, according to WhaleAce Lab’s April 23 report, DeepSeek’s valuation for this round of financing was about RMB 300 billion, and it planned to raise RMB 50 billion, of which RMB 20 billion would be internal capital increases and RMB 30 billion would be external fundraising. The valuation above had already been confirmed by DeepSeek’s internal employees. The Financial Times reported in early May that the final valuation is expected to be about $4.5 billion, close to the figures reported by WhaleAce Lab.

According to WhaleAce Lab’s report, DeepSeek founder Liang Wenfeng explained that this round of financing has two core purposes: first, to supplement compute infrastructure and R&D funding; second, to provide internal employees with a clear market-valuation anchor to retain top talent. WhaleAce Lab reported that DeepSeek’s parent company, Harvest Quant, achieved a 56.55% annualized return in 2025 on top of a RMB 70 billion asset-management base. The estimated cash flow from performance compensation exceeds $700 million.

Since its establishment in July 2023, DeepSeek has relied entirely on internally generated funds from Harvest Quant, and this round marks its first time opening up to external equity investment in its history.

Tencent’s 20% stake proposal rejected; state funds reportedly rumored to play a leading role

According to Bloomberg, Tencent proposed to subscribe for up to 20% of the shares in this round, but DeepSeek rejected the proposal on the grounds that it did not want to give up a large share of control.

According to The Financial Times, the National Development Fund is in talks with DeepSeek regarding leading the first round of financing. Pan Helin, a member of the Expert Committee on Information and Communications Economy under the Ministry of Industry and Information Technology, said that bringing in state-owned large funds is not only a consideration from a funding perspective, but also involves the need for “AI future security supervision and regulatory compliance.”

FAQ

What is the core reason for the breakdown in DeepSeek’s financing talks with Alibaba?

According to WhaleAce Lab’s report, the core of the disagreement is that Alibaba wants to deepen AI ecosystem integration through investment, while DeepSeek’s priority is to minimize constraints from terms and maintain technical independence. The two sides were unable to reach an agreement on specific financing terms.

What are the valuation and fundraising targets for DeepSeek’s current round of financing?

According to WhaleAce Lab and The Financial Times, DeepSeek’s valuation for this round of financing is about RMB 300 billion (about $45B). It plans to raise RMB 30 billion externally to supplement compute infrastructure, R&D funding, and provide employees with a market-valuation anchor.

Why did DeepSeek reject Tencent’s stake-in proposal?

According to Bloomberg, Tencent proposed to subscribe for up to 20% of the shares, but DeepSeek rejected the proposal on the grounds that it did not want to give up a large share of control.