Liang Wenfeng, founder of startup company DeepSeek, gives a keynote speech at the 10th China Private Equity Golden Bull Awards held in Shanghai, China on August 30, 2019.
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DeepSeek, the research institute that brought China’s artificial intelligence to the world’s attention last January, has long received funding from founder Liang Wenfeng’s hedge fund, Highflyer Quant.
The fund had been using AI and deep learning to trade stocks for years before providing DeepSeek with initial funding and computing power.
Now, DeepSeek is turning to outside investors to fund its expanding ambitions, with Highflyer securing allocations in some of China’s hottest hard-tech IPOs, from chips to robotics.
Pre-IPO placements (securing stocks before trading begins) can yield huge paper profits for hedge funds, especially if popular stocks rise soon after their debut.
But recent volatility in AI and semiconductor stocks has exposed funds like HighFlyer to sharp drawdowns. As DeepSeek’s capital and computing needs grow, it may no longer be able to rely on high-flyers whose revenues have become “volatile,” said Xiel Qi, a research analyst at Rhodium Group.
He said the Chinese government’s push to list strategically important high-tech companies domestically is creating “favorable pre-IPO investment opportunities” for the fund. “Maximizing profits in the Chinese market will increasingly require investments that are aligned with the Chinese government’s strategic agenda.”
High Flyer and Deep Seek did not respond to requests for comment.
Trading AI volatility
Quantitative fund affiliates Zhejiang Highflyer Asset Management and Ningbo Highflyer Quantitative Investment Management have secured private placements in leading Chinese memory chip maker CXMT and robot maker Unitree Robotics, as well as companies across chip packaging, electronic components and renewable energy, according to a CNBC analysis of IPO data.
CXMT had by far the largest allocation of both funds, with a combined allocation of $26 million (175 million yuan) worth of pre-IPO shares, according to data compiled by Shenzhen Baifan Investment Management, a consultancy that tracks private funds in China.
The memory chip maker soared more than fivefold on its Shanghai debut in July, quickly becoming China’s most valuable company, and has since risen another 20% as of Thursday.
Unitree’s IPO attracted investment not only from Liang’s fund but also from DeepSeek itself. PaiPaiWang said the two funds were allocated a total of $5.8 million in shares. Separately, DeepSeek received 2.31% of the offering amount as one of nine strategic investors and agreed to a 36-month lock-up period. This is a much longer commitment than the 12 months that most strategic backers accept.
Unitree soared 460% on the day of its IPO in Shanghai last week, but has fallen about 27% since then, according to LSEG data. Unitree’s recent underperformance has raised concerns about how the Chinese government can boost emerging strategic sectors without fueling a speculative frenzy.
The global AI chip rout spilled over into quantitative trading, which gained momentum in July, with eight out of nine high-flyer products posting losses, according to state media. The performance of Chinese quantitative funds recovered in August.
“Economic bonus” if you follow Beijing’s policies
According to data available from PaiPaiWang, nearly half of the two high-flyer affiliates’ allocations this year went to semiconductors and their supply chains. In addition to CXMT, the companies include SJ Semiconductor, which specializes in advanced packaging, and chip equipment and test companies.
While Highflyer’s pre-IPO stock is broadly aligned with China’s national priorities, industry experts say Highflyer’s own priority remains the upside potential of the investment.
“DeepSeek’s founding team, including Mr. Liang, are still traders at heart and tend to chase maximum upside,” said Ke Zhong, a portfolio manager at a Shanghai-based hedge fund.
HiFlyer traded Unitree as an investment asset, while DeepSeek invested in the humanoid robot maker as a strategic partner, said Sigrid Wang, a technology analyst at Hutong Research.
“There is a real difference between quantitative funds seeking returns and deep seeking, which selectively uses companies’ balance sheets to build strategic relationships around future AI stacks,” Wang said.
As the Chinese government seeks to attract private investment in AI, robotics and other priority areas, the investment has become “a kind of economic bonus to help boost China’s broader technology sector,” said Kyle Zhang, a fellow at the Brookings Institution.
The Chinese government’s support for DeepSeek and Liang has also helped open doors and improve access to influential lists.
Having star backers like DeepSeek and Liang’s quantitative fund sends a strong signal and could “bring attention and legitimacy to the IPO,” pushing its valuation even higher, Zhang said.
Hutong Research’s Wang said policy support will improve companies’ commercial prospects and lower some of the risks associated with long-term technology investments. Although Liang’s ties with the government have strengthened, Wang said his technology bets appear to be converging with Beijing’s priorities rather than state-led.
This illustrated photo from Reno, USA, January 2, 2026, shows the Deepseek logo on a smartphone screen. (Photo illustration by Jaque Silva/NurPhoto via Getty Images)
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Fund DeepSeek’s AGI goals
DeepSeek’s decision to accept external funding for the first time this year was seen as a sign of growing demand for AI funding and increasing pressure to secure talent amid increased competition.
DeepSeek has become “too big and capital-intensive to remain just a side project for a quantitative fund,” Wang said, noting that DeepSeek’s first funding round of 50 billion yuan ($7.4 billion) represented more than 60% of the high-flyer’s 80 billion yuan in assets.
The AI Institute is in talks with investors to raise at least another $7.4 billion in a second funding round, reportedly valuing it at $74 billion, according to the Wall Street Journal. Investors in the first round include investment firm Monolith Management, Tencent, JD.com, NetEase, and battery maker Contemporary Amperex Technology.
The next round is expected to conclude by the end of August. Liang suspended fundraising in July after remarks he made at an investor meeting were leaked online, including comments that China’s gap with the U.S. in AI was primarily due to constraints on computing resources.
Investors are also betting on DeepSeek’s future mainland listing, said Wayne Xiong, managing partner at Argo Venture Partners, who said the startup risks losing senior engineers without financial incentives.
According to Bloomberg, Liang’s stake in DeepSeek made him the world’s richest AI founder as of July, giving him far more control than many U.S. founders who have diluted their ownership to secure funding for computing power.
