CoverStory:China’sTechSectorCatchesAIFundingFever

Fueled by the dizzying valuations of U.S. tech giants, a parallel capital frenzy has been ignited in China, pushing artificial intelligence (AI) startups, chipmakers and internet platforms into a blistering rush for funding.

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.

In May, China’s two leading memory-chip makers, ChangXin Memory Technologies Inc. (CXMT) and Yangtze Memory Technologies Co. Ltd., pushed forward with listing plans. 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 transactions in the secondary market, China’s most valuable private company ByteDance Ltd. is valued around $600 billion.

The boom is reshaping valuations across three layers of China’s technology sector. Foundation-model startups are being priced on the prospect that a few winners could become the next generation of digital infrastructure companies. Semiconductor and memory-chip makers are being revalued as critical suppliers to the AI data center buildout. Established internet platforms, meanwhile, are trying to unlock AI premiums through secondary-market repricing and spinoffs, as investors assign higher multiples to businesses that look more like pure AI bets than traditional advertising or e-commerce platforms.

Those fundraising and valuation dynamics were once associated mainly with Silicon Valley’s hottest startups. They are now spreading through China’s AI sector. “Many companies are running three fundraising rounds simultaneously: one closing, one under due diligence, and another in early talks,” said Wang Jie, an investor in Moonshot AI and GPU company Moore Threads. “Valuations between overlapping rounds can differ by as much as threefold.”

SpaceX headquarters in Hawthorne, California. Photo: Mike Blake/IC photo

U.S. boom sets the benchmark

The U.S. remains the reference point for the AI capital frenzy. From March 31 to May 15, the combined market capitalization of the so-called Magnificent Seven — Apple Inc., Microsoft Corp., Nvidia Corp., Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Tesla Inc. — rose nearly 30%, while Nvidia briefly reached a market value of $5.7 trillion.

In private markets, SpaceX, OpenAI and Anthropic are emerging as the next wave of mega-valued AI companies. SpaceX filed for a Nasdaq IPO on May 20, with market participants expecting a possible listing valuation approaching $2 trillion. OpenAI raised $122 billion in March at a valuation of $852 billion. Anthropic’s pre-money valuation jumped from $183 billion to $900 billion in less than three months, anchored by annual recurring revenue, or ARR, of about $45 billion.

The U.S. boom matters for China because it is changing investor expectations. Capital is increasingly willing to price AI companies not on current profits, but on the possibility that a small number of winners could become the next generation of global infrastructure companies.

China’s AI Valuation Gap

Chinese model-makers seek pricing power

China’s foundation-model sector has gone through a rapid shakeout. After the “hundred-model war” of 2023, the field has narrowed to a handful of leading startups: DeepSeek, Zhipu AI, MiniMax Group Inc., Moonshot AI and StepFun.

DeepSeek’s emergence in early 2025 narrowed the gap in capabilities between Chinese models and their overseas rivals, while domestic investors have shifted their focus from chatbot iterations to coding applications. Coding capability and revenue have become two of the most important metrics for valuing AI model companies.

Zhipu and MiniMax listed in Hong Kong in January, giving investors a way to price Chinese model companies. Their market values climbed after listing, setting benchmarks for private peers.

MiniMax was initially favored because of its overseas revenue. Its 2025 revenue rose 159% to $79 million, with more than 70% coming from international markets. But after agent applications and coding tools gained momentum, Zhipu’s market value shot up. Zhipu generated 724 million yuan in revenue in 2025, up 132%, making it the largest Chinese model company by revenue.

However, both companies remain in the red. Zhipu reported an adjusted net loss of 3.18 billion yuan in 2025, while MiniMax lost about $250 million.

Wang Jie said the market still values the two companies differently based on what their models do. “Zhipu AI fully shifted toward the coding track in 2025 and concentrated resources there, which significantly lifted revenue,” he said. “MiniMax has a more mature business model, but after Anthropic accused it of illicit model distillation, market confidence pulled back somewhat.”

The listings have encouraged private companies to move faster. Moonshot completed a round at an $8 billion valuation in late February, when its ARR reached $100 million, then immediately opened a new round at a $17 billion valuation. Within half a month, its valuation was raised again to $18 billion, with the company seeking $2 billion at a post-money valuation of $20 billion.

StepFun completed a restructuring in April to prepare for a Hong Kong listing and began a new funding round at the same time. It is expected to raise nearly $2.5 billion at an overall valuation of about $10 billion, with investors including tech hardware manufacturer Huaqin Co. Ltd., electronics manufacturer Shanghai Longcheer Technology Co. Ltd., semiconductor firm OmniVision Technologies Inc., ZTE Corp. and Hong Kong Investment Corp., people familiar with the matter told Caixin.

DeepSeek’s move into fundraising is one of the clearest signs that Chinese AI companies are adapting to the capital-market race. The company had been known for not raising outside capital, not planning an IPO and not aggressively commercializing.

Its new round values it at about 300 billion yuan, with potential investors including founder Liang Wenfeng, state-backed funds, the National Council for Social Security Fund and Hangzhou state capital, according to a technology investment executive at a leading venture-capital firm. Tencent Holdings Ltd. has also been in contact with DeepSeek, Caixin learned. Several market participants told Caixin the round is not open to foreign investors.

The venture capital (VC) investor said DeepSeek’s fundraising has two goals: to offer equity incentives to retain staff as competitors go public, and to fund the technical investment needed for further model upgrades.

Anthropic CEO Dario Amodei unveils Claude 4 at the Code with Claude conference in San Francisco on May 22. Photo: Don Feria/VCG

Chinese AI valuations differ

Chinese AI model companies are closing the tech gap quickly, but their valuations remain far below those of their bigger U.S. peers, partly because they haven’t been as strong at commercialization. “Anthropic’s ARR has exceeded $40 billion, implying a valuation-to-ARR multiple of about 20 to 30 times. DeepSeek has not yet commercialized at scale, while listed Chinese model companies such as MiniMax and Zhipu trade at more than 100 times ARR,” the VC investor said.

ARR has become the preferred valuation yardstick for high-growth AI companies. Because monthly revenue can rise rapidly, investors annualize the latest month’s revenue and use it as the base for valuation.

For Zhipu and MiniMax, valuations are further lifted by the scarcity of listed foundation-model companies globally, UBS China internet analyst Xiong Wei said. Their short trading histories and low liquidity before lockup expirations have also pushed valuations higher.

Valuation is also tied to revenue quality. Chinese models perform well in many benchmark tests and have gained global users because of their cost advantage. On OpenRouter, the world’s largest API aggregation platform, Chinese models account for more than half of model usage, and their share is still rising.

Wang Lixing, chief executive of China Renaissance, said valuations for Chinese foundation-model companies are supported by three factors: import substitution and long-term confidence in China’s homegrown foundation models, using public markets pricing of companies like Zhipu and MiniMax to value companies that are still private, and surging token consumption, which has shown that China’s cost-effective, open-source model strategy has a clear path to survival.

But some caution against using token volume as a valuation benchmark. The VC investor said token usage differs widely in quality and price, and Chinese and overseas prices can vary by more than tenfold or even twentyfold. Some domestic companies use free or low-cost usage to gain volume, a model that may not be sustainable once they begin charging.

He said the industry’s valuation system may start to shift back toward earnings after Anthropic lists. If Anthropic becomes the first model company to generate meaningful profits, its earnings multiple in 2027 or 2028 could become the reference point for the whole sector.

Memory-chip giants’ valuations jump

AI demand is also transforming the valuation of China’s leading semiconductor companies.

CXMT, China’s only domestic DRAM producer in mass production, updated its Shanghai STAR Market prospectus in May, while Yangtze Memory, China’s leading maker of NAND flash memory for storage, began IPO tutoring shortly afterward. The two companies completed their latest private rounds in 2025, with CXMT valued at 158.4 billion yuan and Yangtze Memory at 161.6 billion yuan.

CXMT’s first-quarter revenue in 2026 rose 719% year-on-year to 50.8 billion yuan, while net profit swung to 33 billion yuan from a loss of 2.8 billion yuan in the same period a year earlier.

Source: IPO prospectus

A person close to CXMT said its pre-IPO valuation was only about 140 billion yuan in March 2024, before AI data-center demand exploded. “But CXMT’s first-quarter revenue this year was eye-catching, full-year profit could reach 100 billion yuan, and growth over the next few years is clear,” the person said.

A memory trader told Caixin that high-end chips are in short supply, driving orders to Chinese suppliers. CXMT’s global DRAM market share rose from about 5% in 2024 to 7.7% by the end of 2025, making it China’s largest and the world’s fourth-largest supplier of the memory chip. Yangtze Memory’s share of the NAND market rose from 8% to 11%, putting it in sixth place globally.

The larger question is whether the A-share market can absorb such large offerings. CXMT could reasonably price its IPO at a valuation of 500 billion yuan to 700 billion yuan, leaving room for a post-listing market value of 1 trillion yuan to 1.5 trillion yuan, the person close to the company said. But a listing of that scale could drain liquidity from the market.

Established tech giants seek AI repricing

The AI boom is also changing how investors value China’s largest internet companies.

ByteDance remains China’s most valuable private company. Over the past three years, it has been one of the country’s most aggressive investors in AI, from chip reserves and talent recruitment to product iteration. After TikTok retained its U.S. business at the end of 2025, a major valuation discount also eased.

In February, ByteDance’s valuation rose to $550 billion, up 67% from about $330 billion during an option buyback in August 2025. Caixin learned that secondary-market transactions currently value the company at around $600 billion.

Daily token usage of ByteDance’s Doubao model exceeded 120 trillion in March, doubling from the previous three months. According to IDC, ByteDance’s Volcano Engine ranked first in large-model usage on China’s public cloud platforms with a 49.5% share.

“ByteDance’s $600 billion valuation reflects a market repricing of its value,” China Renaissance’s Wang Lixing said. “After the TikTok risk eased, its secondary-market price is still recovering.”

Still, pure AI companies often receive higher valuation premiums than diversified internet groups, and that trend is encouraging spinoffs. Short video platform Kuaishou Technology has carved out its video-generation model Kling AI as an independent business and is preparing for a potential listing. Kling’s valuation has grown above $20 billion, close to Kuaishou’s own market value of about $29.7 billion as of May 12.

Morgan Stanley said a $20 billion valuation for Kling would imply about 20 times 2026 ARR, well above its previous sum-of-the-parts estimate of $6 billion. If the spinoff is completed, it could unlock significant value for Kuaishou because pure AI companies trade at much higher multiples than traditional internet companies.

More funding sources

The AI boom is reviving China’s private-market fundraising after several difficult years. In 2025, reopened IPO channels and improved liquidity in Hong Kong helped restore exit expectations, encouraging yuan-denominated funds to raise and invest again.

“Over the past five years, this is the year when yuan-denominated limited partners (LPs) are most abundant,” said Jerry Bai, founding partner at Glory Ventures. New capital in China’s private market is mainly coming from state-backed yuan-denominated LPs, including national guidance funds, the China SME Development Fund Co. Ltd., and local funds such as Shanghai state-backed vehicles.

China’s third phase of the National Integrated Circuit Industry Investment Fund, known as the Big Fund, has been invited to participate in DeepSeek’s financing and is likely to become a lead investor, people familiar with the matter told Caixin.

Bai said U.S. dollar-denominated LPs have also recently begun looking again at China. Hong Kong stocks have been active for more than a year, and the new AI cycle in Chinese mainland shares is adding another catalyst. “People cannot afford to miss China’s opportunity and the investment window again,” he said.

But the recovery remains uneven. Zhou Hao, a partner at Bain & Co., said general partners’ fundraising demand is still about 2.5 times the available LP supply, while the top 10 fund managers accounted for about 80% of fundraising in 2025, up from about 30% in 2022.

Contact reporter Kelsey Cheng (kelseycheng@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)