DeepSeek’s latest artificial intelligence advancement is reigniting interest in China’s venture capital landscape, following three years of declining investment. The surge in AI enthusiasm comes as Insilico Medicine, a leader in AI-driven drug discovery, finalized a $110 million Series E funding round led by Hong Kong-based Value Partners. CEO Alex Zhavoronkov stated that interest from Chinese funds intensified significantly after DeepSeek’s announcement, prompting plans for an additional Series E2 round.
Zhavoronkov noted that global investors, particularly from the U.S., have expressed growing interest in Chinese AI companies. He attributed this renewed confidence to DeepSeek’s impact on the market, suggesting that investment momentum in China is rebounding.
China’s venture capital investment had been in decline, reaching a record low of $48.86 billion in 2024. However, shifting regulatory clarity and a strategic focus on AI have altered investor sentiment. Annabelle Yu Long, founding partner at BAI Capital, remarked that firms are shifting strategies, prioritizing reinvestment in core AI-driven companies rather than pursuing new startups. She highlighted companies such as Black Lake and Lejian, which have leveraged AI to enhance profitability, signaling a broader industry shift.
Recent AI investment rounds reflect this trend, with Zhipu AI securing $137.68 million from Alibaba Cloud and a Hangzhou-backed fund, and robotics company LimX Dynamics attracting new capital. The Lunar New Year in late January marked a turning point for AI funding, with DeepSeek’s R1 model release and the widely publicized Spring Festival gala featuring Unitree’s robotics innovations.
Hongye Wang, executive director at Forebright Capital, observed that international investors, including those from the Middle East, are actively seeking opportunities in China’s AI sector. He indicated that Forebright is focusing on AI-driven hardware, such as humanoid robots and computing reasoning solutions, as part of its investment strategy.
China’s leadership has also signaled strong policy support for AI growth. President Xi Jinping’s endorsement of DeepSeek’s founder in February reinforced government backing for generative AI expansion. Alibaba Chairman Joe Tsai stated that a recent private meeting between Xi and China’s top business leaders restored confidence among entrepreneurs, encouraging new investments.
Premier Li Qiang’s policy report outlined plans to accelerate venture capital development, while Zheng Shanjie, head of the National Development and Reform Commission, announced a central government fund expected to mobilize 1 trillion yuan ($137.7 billion) for tech investment. The People’s Bank of China also plans to nearly double its loan program for tech innovation, further reinforcing AI sector growth.
Despite geopolitical tensions and regulatory considerations, AI investment in China is gaining momentum. Palo Alto-based venture capitalist Xuhui Shao noted that while challenges remain, China’s deep talent pool ensures that technological breakthroughs like DeepSeek will continue to drive AI innovation forward.
