China Tech Sector Catches AI Funding Fever

Fueled by the dizzying valuations of U.S. tech giants, a parallel capital frenzy has been ignited in China, pushing artificial intelligence startups, chipmakers and internet platforms into a blistering rush for funding, according to a Caixin Global cover story. China’s leading AI model developers, memory-chip manufacturers and internet platforms are accelerating fundraising, listings and spinoffs as investors race to capture what they see as the next big thing in technology.

The Scale of the Boom

The global context is staggering. AI venture funding hit $297 billion in the first quarter of 2026 alone, with AI capturing 81% of all venture dollars — a concentration never before seen in any single technology category, according to Crunchbase data reported by AI in Asia. China pulled in $16.1 billion in venture investment during Q1, securing its position as the world’s second-largest startup funding market.

Domestically, the numbers are equally striking. In the first three months of 2026, China’s embodied intelligence sector alone saw 88 disclosed funding events totaling over 20 billion yuan (~$2.8 billion), according to IT Juzi data cited by Sohu. This represents nearly threefold growth compared to Q1 2024, with a compound annual growth rate exceeding 60%.

The “Five Little Dragons” Lead the Charge

China’s foundation-model sector has narrowed to five leading startups — DeepSeek, Zhipu AI, MiniMax, Moonshot AI (Kimi), and StepFun — collectively known as the “Five Little Dragons.” Each is pursuing aggressive fundraising strategies.

DeepSeek, which stunned Silicon Valley in January 2025 with its competitive AI at a fraction of the cost, is now seeking its first external funding at a valuation of approximately 300 billion yuan ($44 billion). Potential investors include state-backed funds and Tencent, but not foreign investors. In a move that underscores the pricing war in AI, DeepSeek permanently cut the API price of its flagship V4-Pro model by 75% to 3 yuan ($0.44) per million tokens — less than one-tenth of OpenAI’s GPT-5.5 pricing, as Caixin reported.

Moonshot AI, the company behind the Kimi assistant, completed a round at an $8 billion valuation and immediately opened a new round at $17 billion, later raised to $18 billion. In May 2026, it secured a $2 billion Series D at a valuation exceeding $20 billion, with investors including Meituan Longzhu, China Mobile and CPE. StepFun completed a restructuring for a Hong Kong listing and is expected to raise nearly $2.5 billion at a valuation of about $10 billion.

Zhipu AI and MiniMax both listed on the Hong Kong Stock Exchange in January 2026, choosing the city over New York. MiniMax raised $619 million and doubled on its first trading day, while Zhipu rose 13% on debut. MiniMax’s 2025 revenue rose 159% to $79 million, while Zhipu generated 724 million yuan in revenue, up 132%, making it the largest Chinese model company by revenue — though both remain unprofitable.

Chipmakers Ride the AI Wave

AI demand is transforming valuations of China’s leading semiconductor companies. CXMT, the country’s top memory-chip maker, updated its STAR Market prospectus in May 2026 after first-quarter revenue surged 719% year-on-year to 50.8 billion yuan, swinging to a net profit of 33 billion yuan from a loss. A person close to CXMT said its pre-IPO valuation was only about 140 billion yuan in March 2024 before AI demand exploded, but full-year profit could reach 100 billion yuan. A memory trader noted CXMT’s global DRAM market share rose from 5% in 2024 to 7.7% by end-2025, making it the world’s fourth-largest supplier.

Yangtze Memory began IPO tutoring and completed a private round in 2025 valued at 161.6 billion yuan. The surge in chipmaker valuations reflects the strategic importance of domestic semiconductor production amid ongoing US export controls on advanced chips.

Internet Giants Seek AI Repricing

Established tech platforms are also capitalizing on the AI boom. ByteDance, China’s most valuable private company, has seen its valuation rise to approximately $600 billion in secondary-market transactions, up 67% from about $330 billion in August 2025. Daily token usage of ByteDance’s Doubao model exceeded 120 trillion in March 2026.

This repricing is encouraging spinoffs. Kuaishou carved out its video-generation model Kling AI at a valuation above $20 billion — close to Kuaishou’s own market value of approximately $29.7 billion. Morgan Stanley said a $20 billion valuation for Kling would imply about 20x 2026 annual recurring revenue, unlocking significant shareholder value.

Government Backing and the US-China Dynamic

Beijing’s support for domestic AI is accelerating. China’s 15th Five-Year Plan (2026-2030) mentions AI 52 times, compared with just 11 in the previous plan, and introduces the concept of a “new form of intelligent economy” for the first time, according to the World Economic Forum. The government has set a target of integrating AI into 90% of China’s economy by 2030 and plans to invest 10 trillion yuan ($1.4 trillion) over 15 years, as BBC News reported.

A 60 billion yuan AI investment fund was created in January 2026, and the third phase of the National Integrated Circuit Industry Investment Fund has been invited to participate in DeepSeek’s financing. The US benchmark effect is a powerful driver: the soaring valuations of American tech giants set new benchmarks that make Chinese AI companies look undervalued by comparison.

Market Dynamics and Valuation Divergence

Chinese AI model valuations remain far below US peers due to weaker commercialization. Anthropic’s annual recurring revenue has exceeded $40 billion, implying a multiple of 20-30x, while Chinese listed models like MiniMax and Zhipu trade at over 100x ARR. This scarcity premium reflects the limited number of publicly listed foundation-model companies globally.

New capital is flowing mainly from state-backed yuan-denominated limited partners, though US dollar-denominated LPs have recently begun looking at China again, attracted by the new AI cycle. However, fundraising demand still exceeds LP supply by approximately 2.5 times, and the top 10 fund managers account for about 80% of fundraising in 2025.

What to Watch Next

The AI funding fever raises several critical questions. Can Chinese AI companies achieve profitability at scale, or will the valuation bubble burst? How will ongoing US-China tech tensions affect capital flows and technology access? The industry’s valuation system may shift from ARR multiples back toward earnings-based metrics after major listings.

For now, the momentum shows no signs of slowing. As one Caixin Global analysis put it: “Fueled by the dizzying valuations of U.S. tech giants, a parallel capital frenzy has been ignited in China.” With government backing, deep talent pools and a massive domestic market, China’s AI ecosystem is positioning itself for a long race — one that will reshape the global technology landscape for years to come.