China's DeepSeek, which shook up the market with an ultra-low-priced artificial intelligence (AI) model, has kicked off monetization by simultaneously pursuing a service price hike and a large fundraising. Ahead of an initial public offering (IPO), it is seen as securing funds for massive data center investments while moving away from an ultra-low-price strategy centered on expanding market share to secure both profitability and growth.
On the 6th (local time), according to Bloomberg News and China's business outlet Caijing, DeepSeek recently restarted its second fundraising of about $8 billion (about 11 trillion won). Earlier in June, DeepSeek raised 50 billion yuan (about 11 trillion won) after being valued at about 3.5 trillion yuan (about 740 trillion won). The process was temporarily halted in July after comments by founder and Chief Executive Officer Liang Wenfeng to investors were leaked.
In this fundraising round, DeepSeek's corporate value is being estimated at around 500 billion yuan (about 106 trillion won). The proceeds are expected to be invested in expanding AI infrastructure. DeepSeek is pushing to build a large-scale AI data center in Inner Mongolia and secure a total of 1 GW of computing infrastructure, and plans to procure additional compute from external cloud providers as needed. Reports said building a 1 GW data center equipped with state-of-the-art AI accelerators would cost tens of trillions of won.
A day earlier, DeepSeek notified users that it would "soon raise prices across the board for API services, and the increase will be substantial." It did not disclose the exact magnitude. Under the current "V4-Flash" model, DeepSeek charges $0.14 (about 199 won) per 1 million input tokens and $0.28 (about 397 won) per 1 million output tokens. Considering that China's AI startup Moonshot's "Kimi K3" charges $3 (about 4,256 won) and $15 (about 21,280 won), respectively, and U.S. firm Anthropic's latest model "Fable 5" charges $10 (about 14,185 won) and $50 (about 70,000 won), DeepSeek's prices are among the industry's lowest.
DeepSeek's ultra-low-price policy sparked a price war in the global AI industry. A neologism even emerged: the "DeepSeek Death Zone," meaning competitors must be cheaper than DeepSeek or deliver higher performance to survive. To respond to the price-cutting competition DeepSeek triggered, China's AI corporations have focused on expanding market share by pushing free or ultra-low prices and open source.
However, with external fundraising and an IPO ahead, there is an outlook that DeepSeek's move to revise its ultra-low-price strategy and pursue profitability will reorganize China's AI market around profit-focused competition. In practice, the center of gravity in AI competition is shifting from simple model contests to a race to secure computing infrastructure such as data centers and graphics processing units (GPUs). As a result, there is criticism that the existing low-price strategy alone has limits for shouldering massive capital expenditures.
Earlier, DeepSeek saw inference demand surge with last month's release of the V4-Flash model, pushing daily throughput to the trillions of tokens, and Moonshot also suspended new subscriptions after its new model released last month drew unexpectedly big attention that exceeded its compute capacity.
Bloomberg said, "With this IPO, DeepSeek faces three challenges at once: investor expectations, rapid market expansion, and building computing infrastructure that requires massive capital," adding, "DeepSeek's price hike will be a turning point for China's AI market."