Chinese AI developers rush to capital markets as U.S. chip restrictions loom

Beijing urges patient capital for AI as IPO pipeline swells

Chinese artificial-intelligence developers are racing to raise money through share offerings or loans, according to executives and investors, as they seek to raise more capital to compete with U.S. rivals and secure access to computing power and Nvidia chips before the U.S. potentially tightens technology restrictions.

At least six startups that develop AI models are preparing for initial public offerings in Shanghai or Hong Kong through 2027, according to people familiar with the matter. They are joined by China’s two largest memory-chip makers and three humanoid-robot developers. A flurry of new model releases from China has brought local AI systems closer to cutting-edge U.S. systems, yet researchers and executives at Chinese AI companies say a shortage of investment and chips is holding them back.

“The primary driver” of the fundraising rush “is the substantial capital required to fund AI-model development, computing infrastructure and talent acquisition,” said Gary Tan, a Singapore-based portfolio manager at Allspring Global Investments.

There is an additional urgency behind the capital push, according to company executives. The U.S. still allows Chinese AI companies to access top-of-the-line Nvidia chips in facilities outside China, but that window may not remain open, as talk grows in Washington about tightening restrictions. By raising funds now and signing contracts with overseas cloud-service providers, Chinese companies can secure more computing power ahead of any possible further U.S. restrictions.

Beijing-based Moonshot AI, which released a new model last week, is completing a private funding round valuing it at more than $30 billion and is preparing for a Hong Kong IPO targeted for early next year, according to people familiar with the matter. Rival DeepSeek is aiming to raise several billion dollars in a private placement that would value the Hangzhou-based AI developer at more than $70 billion, with a public listing in Shanghai planned for next year.

TikTok parent ByteDance is in talks to borrow $20 billion by issuing bonds to global investors. Social-media company Tencent recently raised around $4.7 billion in a bond sale to bankroll its AI development, while search-engine leader Baidu is aiming to list its AI chip business this year in light of the higher valuation awarded to AI businesses. Still, all of these sums are dwarfed by the money driving growth at the U.S. leaders — OpenAI secured more than $100 billion in funding commitments earlier this year.

In January, China’s Z.AI and MiniMax became the first AI model startups to go public since OpenAI released ChatGPT in 2022, giving investors a long-awaited direct way to play China’s AI boom. Z.AI’s market capitalization peaked in June at around $150 billion but has fallen back sharply after local rivals released more powerful models.

Beijing has told state and private investors to channel what it calls patient capital into technologies such as AI and semiconductors, which demand sustained investment with no guarantee of quick profits. “We must smooth out corporate financing channels, and guide capital toward early-stage startups, smaller enterprises, long-term investments and core hard tech,” Chinese leader Xi Jinping told a science congress this month.

Following Xi’s speech, state-owned financial institutions pledged to hold long-term stakes in listed AI companies. The government’s securities regulator said Tuesday it had spoken with institutional investors about measures to prevent market turbulence after some brokerages said the AI rush might be getting out of hand.

CXMT, which produces memory chips for smartphones and laptops, is gearing up for a Shanghai IPO. Strong investor interest has pushed its fundraising target to more than $8 billion, double its initial goals, with the IPO valuing CXMT at about $85 billion ahead of trading. In the first half, companies across the AI supply chain raised more than $10 billion in Hong Kong, according to Charu Chanana, chief investment strategist at Saxo Markets. More than 70 companies are in the listing pipeline.

“There is sufficient liquidity for the strongest offerings, but probably not enough to support every company at every proposed valuation,” Chanana said.

For investors, including those outside China, the IPOs represent a potential once-in-a-generation opportunity to get a piece of companies that could be leaders of the AI era, the Wall Street Journal reported. The risks are high, however — some of today’s players may not survive for the long term, China’s biggest players lack significant revenue outside the country, and U.S.-China geopolitical clashes may hinder their expansion.

Long Yili, a shop owner in southwest China, won a lottery last week to buy 500 shares of CXMT, the memory-chip maker. “This is probably the best news I’ve had in a while,” Long said. “I feel like I’m doing my part for China’s tech.”