DeepSeek is close to raising more than 80 billion yuan, or about $12 billion, in a funding round backed by Tencent and CATL, giving the Chinese AI developer a much larger capital base ahead of a planned domestic IPO.
The financing exceeds DeepSeek’s original target of about 50 billion yuan and could reach 100 billion yuan, according to people familiar with the deal. Reuters reported that the round is expected to close in October at a targeted valuation of roughly 500 billion yuan, or $74 billion.
Tencent’s participation gives the story an immediate ETF connection. As of October 5, Tencent was KWEB’s largest holding at 10.30% of net assets, ahead of Alibaba and PDD. DeepSeek itself remains private, but KWEB investors already own one of its biggest corporate backers.
The scale of the raise also matters because DeepSeek is moving toward public-market scrutiny. The company hired CITIC Securities in September to prepare for a possible listing on Shanghai’s technology-focused STAR Market, with the IPO process expected to begin this year.
DeepSeek Is Becoming a Capital-Markets Story
The latest raise follows DeepSeek’s first external funding round in June, when it secured about $7.4 billion at a post-money valuation above $50 billion. Tencent and CATL were already among the largest outside investors in that round.
The capital is being raised as DeepSeek expands computing infrastructure, develops larger models and works more closely with Huawei on software optimized for Ascend AI chips. Reuters reported that the company recently released DeepSeek-V4.1-Flash, designed for faster inference, higher throughput and greater model scale.
KSTR Has Outperformed KWEB by Almost 50 Percentage Points
The ETF angle is increasingly split between China’s internet platforms and its domestic semiconductor and hardware complex.
As of September 30, KSTR was up 20.16% year to date, while KWEB was down 28.05%, a gap of 48.21 percentage points. KSTR also returned 11.95% over one year, compared with a 38.19% decline for KWEB.
That divergence is central to the DeepSeek story. KWEB owns platform companies such as Tencent, Alibaba and PDD, while KSTR is concentrated in the domestic technology and semiconductor ecosystem supplying China’s push for greater computing independence.
Nukoud examined that split in Could DeepSeek’s IPO Energize China Tech Stocks? KWEB and KSTR Tell Two Very Different Stories, where the stronger performance of semiconductor exposure contrasted with weakness in consumer-facing internet stocks.
What Is China’s STAR Market?
The Science and Technology Innovation Board, usually called the STAR Market, is Shanghai’s dedicated board for science and technology companies. It was launched in 2019 as part of China’s capital-market reforms and uses a registration-based IPO system intended to make it easier for high-growth technology companies to raise equity capital.
The STAR 50 Index selects 50 of the board’s larger and more liquid securities, using market capitalization and liquidity screens. The Shanghai Stock Exchange says the index is designed primarily as an investment benchmark for the core companies on the board.
That is where KSTR comes in. The KraneShares China Technology & Semiconductor STAR 50 Index ETF tracks the STAR 50 and had about $382 million in net assets as of October 5, with a 0.65% net expense ratio.
DeepSeek is not currently held by KSTR. If it completes a STAR Market IPO, any future inclusion would still depend on the index’s eligibility, liquidity and rebalancing rules.
For GCC investors, the distinction is increasingly clear. KWEB, which is cross-listed on ADX, offers indirect exposure through Tencent and other large internet platforms. KSTR offers a more direct route into the STAR Market ecosystem where DeepSeek is preparing to list. If the IPO proceeds, DeepSeek could eventually connect those two sides of China’s AI trade: the platforms financing and distributing AI services, and the domestic technology market supplying the infrastructure behind them.
