Nomura Asia Insights: How is China's AI Sector Financed?

Nomura explores the funding sources and structural dynamics of China's artificial intelligence sector, highlighting a diverse capital ecosystem. Venture capital remains the primary engine, driving total AI funding to $12 billion in 2025, an 18% year-over-year increase. Government-guided funds and state-owned capital represent approximately 30% of total financing, specifically targeting foundational research and semiconductor development. Meanwhile, internal investments from major technology conglomerates like Baidu, Alibaba, and Tencent account for 25% of industry investments, largely supporting large language model R&D.

Despite a global slowdown in AI investments, Chinese funding continues to expand, largely shielded by robust domestic capital. Geopolitical tensions have significantly reduced foreign capital participation, dropping to 10% in 2025 from 25% in 2020. The largest single financing round in 2025 reached $2 billion, secured by an autonomous driving company. Nomura anticipates total AI funding will grow between 15% and 20% in 2026, reaching $140 to $145 billion, driven predominantly by advancements in large models and autonomous driving. Medical AI is also emerging as a rapidly growing sub-sector with a 25% growth rate. The report concludes that China's AI financing ecosystem is steadily transitioning from a government-driven model to a market-driven structure, though regulatory compliance costs continue to present operational challenges.