When Hype Outpaces Reality: The DeepSeek Effect

Chinese AI company DeepSeek didn’t just make headlines—it sent shockwaves through global markets. On Monday, DeepSeek’s buzz triggered a massive sell-off in U.S. tech stocks, with Nvidia plummeting nearly 20%. But in China, the story took a wild turn. Shares of companies rumored to have ties to DeepSeek skyrocketed—despite zero evidence to back up the claims. Let’s break down the chaos.

The Players in This Frenzy

Here’s who rode the hype train:

• Huajin Capital and Zhejiang Orient: Both surged 10% on Monday, fueled by rumors of DeepSeek investments. But Huajin Capital denied any involvement, and Zhejiang Orient remains silent.
• Sublime China Information: This research company jumped 20%—the legal daily maximum—on claims of collaborating with DeepSeek on AI models. Spoiler: They denied it outright in a public disclosure.

“The rumors appear to have originated from unsubstantiated Chinese lists that went viral.”

TechCrunch

Where Did the Rumors Start?

The frenzy seems to have been sparked by viral, unverified lists circulating online, linking various public companies to DeepSeek. But here’s the kicker: DeepSeek is a private company with no publicly announced VC investments. Corporate records show no VC firms on its cap table. Instead, founder Liang Wenfeng is listed as the sole beneficial owner of DeepSeek’s three entities.

DeepSeek’s Funding Reality

DeepSeek is funded by High-Flyer, a quant firm where Wenfeng serves as CEO. In a 2023 interview, Wenfeng revealed that while he had discussions with potential investors, VCs were hesitant to back a research-focused company like DeepSeek, prioritizing commercialization instead. As of now, DeepSeek has no plans to fundraise.

“VCs seemed hesitant about investing in a research-focused company, prioritizing commercialization instead.”

Liang Wenfeng, DeepSeek Founder

The Takeaway: Hype ≠ Reality

This episode is a stark reminder of how quickly markets can spiral on speculation. While DeepSeek’s AI advancements are impressive, the baseless rally around unrelated stocks highlights the dangers of unchecked hype. Investors, take note: always dig deeper than the headlines.