The Chinese government is accelerating its push to dominate the global AI and semiconductor industries through state-backed investments, funneling billions into companies like DeepSeek, Moonshot AI, and StepFun. In a significant shift, DeepSeek, founded by hedge fund billionaire Liang Wenfeng, recently accepted its first external investment from the China Integrated Circuit Industry Investment Fund, also known as the Big Fund. The deal reportedly values DeepSeek at over $45 billion, with a target raise of up to $7.35 billion.
State Capital Fuels AI Boom
This infusion of state capital reflects a broader trend in China's AI market. According to recent data, government-linked investors have gone from fewer than 10 AI deals annually before 2018 to more than 140 in 2025—a 15-fold increase. In semiconductors, the state’s involvement is even more pronounced, with median deal sizes surging from $27.45 million in 2025 to $30.48 million this year.
"The state recognizes they can’t really match what Nvidia or the rest of the world’s AI giants are doing," said Kaidi Gao, a senior VC analyst at PitchBook. "But there is a different game that they can play. They can deploy capital into what are the most readily addressable sectors."
U.S.-China Tech Rivalry Escalates
The move comes amid escalating tensions between the U.S. and China over technological supremacy. In January 2025, the U.S. banned its investors from backing Chinese AI and chip companies. China has responded by tightening control over its own tech firms, requiring government clearance for foreign investments in strategic sectors. For example, Moonshot AI, currently raising $1 billion at an $18 billion valuation, must now seek Beijing’s approval before accepting U.S. capital.
These measures highlight the growing divide between the two global powers, as both countries close doors on cross-border investments in critical industries. The Chinese government’s strategy aims to create "national champions" capable of competing with U.S. tech giants, further consolidating its influence over the AI and semiconductor sectors.