The emerging Chinese artificial intelligence company, DeepSec, is close to raising at least 80 billion yuan ($11.93 billion) in its latest financing round, in a huge deal that reflects the growing appetite of investors towards Chinese artificial intelligence companies, at a time when Beijing seeks to build a technological system that is less dependent on American chips and platforms.
Bloomberg News reported on Tuesday, citing informed sources, that the giant Chinese battery company Catel and the technology group Tencent Holdings have pledged to provide amounts that are among the largest in the current financing round.
Deep Sec initially aimed to raise about 50 billion yuan, but demand from investors exceeded expectations after the successful launch of its latest artificial intelligence models, pushing the volume of expected financing to no less than 80 billion yuan, with the final value of the round potentially approaching 100 billion yuan, or about $14.9 billion according to the exchange rate mentioned in the report.
If the round is completed at these sizes, it will give DeepSec significant financial resources to expand model development and computing infrastructure, at a time when the development of advanced artificial intelligence systems requires huge investments in chips, data centers, energy and software.
The round comes after the company launched last month its latest model, “DeepSec-V 4.1-Flash,” and said it was designed to provide greater capabilities, higher speed of reasoning, and increased ability to process requests, in addition to supporting expansion towards larger models.
This coincides with Deep Sec’s moves to deepen its connection with the local Chinese technology system. The company recently entered into a partnership with Huawei Technologies to develop improved software tools to work on Huawei's Ascend artificial intelligence chips.
This partnership is gaining importance beyond cooperation between the two companies, as it reflects China's efforts to reduce the dependence of artificial intelligence developers on the NVIDIA system, whose chips and software have become a major pillar in the development of advanced models globally.
Building integrated domestic alternatives, combining chips, software and models, represents one of the main challenges for the Chinese artificial intelligence sector. DeepSec's cooperation with Huawei would provide a test of the ability of Chinese models to operate more efficiently on local infrastructure.
Tencent's participation in the financing round also carries a strategic significance, given that the Chinese group owns extensive businesses in cloud computing, games, digital services, and artificial intelligence. As for CATL, the largest Chinese name in the electric car battery industry, its participation comes at a time when the use of artificial intelligence is expanding in manufacturing, automation, energy management and supply chains.
The Deep Sec path is not limited to raising private financing. Reuters reported last month that the company had hired Citic Securities to prepare for a potential listing on the Star Market on the Shanghai Stock Exchange, a market largely dedicated to technology and innovation companies.
The timing of the initial public offering, the target valuation, and the amount of funds that the company may raise through the listing are still undecided, but the potential preparation for the offering in conjunction with the large financing round puts Deep Sec facing a new phase of institutional expansion.
The outcome of the current round may also affect any future valuation of the company upon listing, especially if the final financing approaches 100 billion yuan. However, the amount of money being raised does not alone reflect the company's value or evaluation, but rather represents the new capital that investors seek to pump into it.
The significant increase from the initial target of 50 billion yuan to at least 80 billion reflects the shift in investor interest after the launch of the new model. If the financing reaches 100 billion yuan, it will be double the amount the company initially targeted.
These developments come at a time when the artificial intelligence race within China is accelerating, with technology companies seeking to develop more powerful models, while at the same time reducing their operating costs, increasing the speed of reasoning, and improving their ability to work with Chinese chips.
For Deep Sec, the upcoming round provides more than just financial liquidity; It brings together big names from the Chinese technology and industrial sectors around the company, in parallel with its partnership with Huawei and its potential preparations to enter the stock market.
However, according to published information, the deal is still in the preparation stage, and the concerned parties have not officially confirmed its details. Therefore, the final value of the round and the identity of investors and their shares will remain among the most prominent elements that the market awaits.
If the round is completed at the announced minimum, Deep Sec will have obtained about $12 billion to finance the next phase of its expansion. Reaching about 100 billion yuan will reflect a higher level of investor confidence in the company’s ability to compete, and will give it greater resources to develop its computer models and architecture in a race in which the cost of technology and the speed of innovation are increasing.
