Tencent Cloud slashes DeepSeek-V4 prices by up to 97.5%

Tencent Cloud will cut prices on its DeepSeek-V4 series models by as much as 97.5% starting June 3, a move that threatens to ignite a pricing war across China's AI cloud market and compress margins for hyperscalers racing to deploy large language models at scale.

"China's open-source models now lag US leading closed-source models by only three to six months, and companies with consumer traffic advantages like Tencent and Alibaba are best positioned to monetize," Jefferies analysts wrote in a note, highlighting the narrowing gap between domestic and US AI capabilities.

The price reduction applies to Tencent Cloud's intelligent agent development platform and covers the full DeepSeek-V4 series. Model service capabilities remain unchanged, the company said. The cut of as much as 97.5% far exceeds typical promotional discounts in the sector, where Alibaba Cloud and Baidu AI Cloud have offered reductions of 50% to 70% on select models over the past year.

The aggressive pricing signals that Chinese AI model deployment is rapidly commoditizing, with cloud providers competing on cost rather than model quality as open-source alternatives narrow the performance gap with proprietary systems. For Tencent Holdings, the move may pressure near-term cloud revenue — the company's cloud business generated roughly 11% of total revenue in 2025, according to company filings — but could drive adoption among price-sensitive small and medium enterprises that have been slow to integrate generative AI.

Alibaba Cloud and Baidu AI Cloud face pressure to respond with matching cuts or risk losing market share in China's fast-growing AI infrastructure market, which IDC estimates will exceed $25 billion by 2027. Tencent shares traded in Hong Kong were little changed on the news, suggesting investors view the pricing strategy as a long-term market share play rather than a margin-destructive move.

This article is for informational purposes only and does not constitute investment advice.