DeepSeek’s AI advancements are reinvigorating China’s venture capital scene after three years of decline. The launch of Insilico Medicine’s funding round indicates a surge of investor interest, signaling a possible return of capital into the sector. Government support alongside increased domestic and foreign engagement points to a positive shift in sentiment around Chinese AI investments, despite existing regulatory challenges.
DeepSeek’s advancements in artificial intelligence are revitalizing China’s venture capital landscape after three years of declining investments. Following the launch of their OpenAI competitor in January, the AI drug discovery company Insilico Medicine secured a $110 million Series E funding round, led by Value Partners. Company CEO Alex Zhavoronkov noted a dramatic increase in interest from investors, indicating plans for an additional funding round due to overwhelming late-stage interest.
Insilico Medicine leverages AI technologies, including those from DeepSeek, to develop drug models, having already achieved clinical testing approvals for ten drugs. Zhavoronkov has observed heightened curiosity from global investors concerning potential investments in Chinese AI firms during his recent trips to the United States, predicting a resurgence in funding for the sector.
The decline in venture capital funding, which hit a record low of $48.86 billion in 2024, was attributed to regulatory uncertainties and slow economic growth. However, emerging regulatory clarity is creating a renewed optimism among investors. Annabelle Yu Long of BAI Capital remarked on the shift in sentiment as investors seek out the next successful venture akin to DeepSeek, although she advises her team to prioritize existing investments with promising AI-driven growth.
Examples include profitable outcomes for companies such as Black Lake and Lejian, both utilizing AI effectively. Long anticipates listing nine of her portfolio companies this year, reflecting investor confidence. Concurrently, Insilico’s Zhavoronkov warned that many Chinese investors are now favoring established players in the AI drug sector due to past losses.
Significant recent funding also highlights this trend, with Zhipu AI securing approximately $137.68 million. This recent Lunar New Year is deemed a pivotal moment for AI investments, notably with DeepSeek’s R1 model stimulating investor interest. Hongye Wang of Forebright Capital noted a rebound in domestic investor confidence and plans for several investments in diverse technology sectors.
Beijing has also begun showing support for the sector, as seen when President Xi Jinping promoted DeepSeek, signalling encouragement for generative AI development. The government’s plans include establishing a fund to mobilize 1 trillion yuan for technology investments, underscoring a commitment to fostering venture capital growth. Liu Rui of China Renaissance Capital expressed anticipation for increased resources directed towards AI technologies this year.
Nonetheless, tensions with the United States regarding tariffs and tech restrictions continue to pose challenges for international investors. Xuhui Shao, from Foothill Ventures, cautioned about the complexities of investing in Chinese AI due to capital flow restrictions and the difficult landscape for international expansion. He emphasized that despite risks, innovation in sectors like AI should be expected, given China’s robust talent pool of engineers and researchers who can drive further advancements.
In summary, DeepSeek’s achievements are invigorating the venture capital sector in China following years of decline. The overall sentiment is shifting positively as investors seek opportunities within established AI firms, motivated by renewed government support and increased global interest. Despite ongoing regulatory and geopolitical challenges, the potential for growth in China’s AI landscape remains substantial, sparking optimism amongst both domestic and international investors.
Original Source: www.cnbc.com
