How DeepSeek founder's quant empire is taking on China's choppy IPO boom

DeepSeek founder Liang Wenfeng is best known for the AI model that gave China its "ChatGPT moment." Less visible is the quant empire that bankrolled the AI lab. As DeepSeek's funding needs grow, the AI lab is seeking fresh outside capital and won't be able to rely on High-Flyer Quant, the hedge fund Liang co-founded. This year, the quant fund has picked up allocations across some of China's hottest hard-tech IPOs while navigating an earlier global AI-chip selloff.

DeepSeek, the lab that put Chinese artificial intelligence on the map last January, has long been financed by High-Flyer Quant, its founder Liang Wenfeng's hedge fund. The fund used AI and deep learning to trade stocks for years before supplying DeepSeek with early funding and computing power. Now, DeepSeek has turned to outside investors to fund its growing ambitions, while High-Flyer has secured allocations across some of China's hottest hard-tech IPOs, from chips to robotics.

Pre-IPO placements – shares secured before trading begins – can deliver outsized paper gains for hedge funds, particularly when sought-after stocks rally on their debuts. But recent volatility in AI and chip stocks exposed funds like High-Flyer to sharp drawdowns. As DeepSeek's capital and compute needs grow, it may be unable to rely on High-Flyer, whose revenue has become "unstable," said Rhodium Group research analyst Ciel Qi. Beijing's push for strategically important tech firms to list at home has created "lucrative pre-IPO investment opportunities" for funds, she said. "Maximizing returns in China's market increasingly requires investing in line with Beijing's strategic agenda."

High-Flyer and DeepSeek did not respond to requests for comment.

Trading the AI volatility

The quant fund's affiliates, Zhejiang High-Flyer Asset Management and Ningbo High-Flyer Quantitative Investment Management, have secured private placements in China's leading memory chipmaker CXMT and robot maker Unitree Robotics, as well as companies spanning chip packaging, electronic components and renewable energy, according to CNBC's analysis of IPO data.

CXMT was by far the two funds' largest allocation, with a combined $26 million, or 175 million yuan, worth of pre-IPO shares, according to data compiled by Shenzhen PaiPaiWang Investment & Management, a consultancy that tracks private funds in China. The memory chipmaker surged more than fivefold in its Shanghai debut in July, quickly becoming China's most valuable company, and has gained another 20% since then as of Thursday.

Unitree's IPO drew investments not only from Liang's funds but also DeepSeek itself. The two funds were allocated a combined $5.8 million in shares, according to PaiPaiWang. Separately, DeepSeek received 2.31% of the offering as one of nine strategic investors and agreed to a 36-month lock-up period, a much longer commitment than the 12 months accepted by most strategic backers.

Unitree soared 460% the day of its IPO in Shanghai last week, but has retreated some 27% since then, according to LSEG data. Unitree's recent slump has raised concerns about how Beijing may boost emerging strategic sectors without stoking a speculative frenzy.

A global AI-chip rout spilled into the momentum-driven quant trades in July, when eight of High-Flyer's nine products recorded losses, according to state-backed media. Performances at Chinese quant funds have rebounded in August.

'Financial bonus' for riding Beijing's agenda

Nearly half of the two High-Flyer affiliates' ...