Cover Story: China’s Tech Sector Catches AI Funding Fever

1. Fueled by the dizzying valuations of U.S. tech giants, a parallel capital frenzy has ignited in China, pushing AI startups, chipmakers, and internet platforms into a blistering rush for funding [para. 1]. China’s leading AI model developers, memory-chip makers, and internet platforms are accelerating fundraising, listings, and spinoffs as investors rush to get into what they see as the next big thing in technology [para. 2]. In May, China’s two leading memory-chip makers, CXMT and Yangtze Memory, pushed forward with listing plans, while AI model startups Moonshot AI and StepFun went ahead with large private funding rounds. AI-model maker DeepSeek, long known for avoiding outside fundraising, began sounding out investors to raise capital at a valuation of about 300 billion yuan ($44 billion). Based on secondary-market transactions, China’s most valuable private company, ByteDance, is valued around $600 billion [para. 3].

2. The U.S. boom sets the benchmark for this frenzy. From March 31 to May 15, the combined market capitalization of the Magnificent Seven rose nearly 30%, while Nvidia briefly reached a market value of $5.7 trillion [para. 8]. In private markets, SpaceX, OpenAI, and Anthropic are emerging as the next wave of mega-valued AI companies, with SpaceX approaching a $2 trillion valuation, OpenAI valued at $852 billion, and Anthropic jumping to a $900 billion valuation [para. 9]. This matters for China because it changes investor expectations, making capital increasingly willing to price AI companies not on current profits but on the possibility that a few winners could become global infrastructure companies [para. 10].

3. China’s foundation-model sector has narrowed to five leading startups: DeepSeek, Zhipu AI, MiniMax, Moonshot AI, and StepFun [para. 13]. DeepSeek’s emergence in early 2025 narrowed the capability gap with overseas rivals, and coding capability and revenue have become key metrics for valuation [para. 14]. Zhipu and MiniMax listed in Hong Kong in January, setting benchmarks for private peers. 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 [para. 15][para. 16]. Both remain in the red [para. 17]. Moonshot AI completed a round at an $8 billion valuation and immediately opened a new round at a $17 billion valuation, later raised to $18 billion [para. 19]. 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 [para. 20]. DeepSeek’s fundraising round values it at about 300 billion yuan, with potential investors including state-backed funds and Tencent, but not foreign investors [para. 21][para. 22].

4. Chinese AI model valuations remain far below U.S. peers due to weaker commercialization. Anthropic’s ARR has exceeded $40 billion, implying a multiple of 20–30x, while Chinese listed models like MiniMax and Zhipu trade at over 100x ARR [para. 26]. ARR has become the preferred valuation yardstick, and valuations are lifted by the scarcity of listed foundation-model companies globally [para. 27][para. 28]. However, some caution against using token volume as a benchmark due to wide price differences between Chinese and overseas models [para. 31]. The industry’s valuation system may shift back toward earnings after Anthropic lists [para. 32].

5. AI demand is transforming valuations of China’s leading semiconductor companies. CXMT updated its STAR Market prospectus in May, and Yangtze Memory began IPO tutoring, with both completing private rounds in 2025 valued at 158.4 billion yuan and 161.6 billion yuan respectively [para. 36]. CXMT’s first-quarter 2026 revenue rose 719% year-on-year to 50.8 billion yuan, swinging to a net profit of 33 billion yuan from a loss [para. 37]. 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 [para. 39]. 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 [para. 40]. However, the A-share market may struggle to absorb such large offerings, with a potential IPO valuation of 500–700 billion yuan [para. 41].

6. Established tech giants are also seeking AI repricing. ByteDance remains China’s most valuable private company, with its valuation rising to $550 billion in February, up 67% from about $330 billion in August 2025, and secondary-market transactions now value it around $600 billion [para. 45]. Daily token usage of ByteDance’s Doubao model exceeded 120 trillion in March [para. 46]. This repricing encourages spinoffs: Kuaishou carved out its video-generation model Kling AI, with a valuation above $20 billion, close to Kuaishou’s own market value of about $29.7 billion [para. 48]. Morgan Stanley said a $20 billion valuation for Kling would imply about 20x 2026 ARR, unlocking significant value [para. 49].

7. The AI boom is reviving China’s private-market fundraising. In 2025, reopened IPO channels and improved liquidity in Hong Kong restored exit expectations [para. 51]. New capital mainly comes from state-backed yuan-denominated LPs, and China’s third phase of the National Integrated Circuit Industry Investment Fund has been invited to participate in DeepSeek’s financing [para. 52][para. 53]. U.S. dollar-denominated LPs have also recently begun looking at China again, with the new AI cycle adding a catalyst [para. 54]. However, the recovery remains uneven, with fundraising demand still about 2.5 times LP supply, and the top 10 fund managers accounting for about 80% of fundraising in 2025 [para. 55].