Trump executive powers set to block US investors pipeline to Chinese AI market

American investors are putting significant funds into Chinese artificial intelligence companies even as tensions between the two nations over technology continue to grow.

Money is pouring into shares of Chinese technology firms that are building AI systems, and cash is also moving into exchange-traded funds that follow China’s wider technology industry.

Venture capital groups operating in China are collecting funds denominated in U.S. dollars for AI investments, and American university endowments that stayed away from China for several years are now thinking about coming back, people who manage these funds say.

This wave of investment comes at a time when American legislators are pushing for stronger restrictions on U.S. money going to China, pointing to national security worries.

The yearly defense spending bill that Congress passes included language giving President Trump authority to toughen the rules from the Biden years that limit American investment in Chinese high-tech sectors like AI. The House approved this bill on Wednesday, and it should get final approval before Christmas.

Mike Johnson, the House Speaker from Louisiana, said on Sunday that “investments propping up Communist China’s aggression must come to an end.”

While tensions between the United States and China have reduced investor interest in private Chinese firms, those who invest in publicly traded stocks are increasingly seeing chances in China.

This shift happened after Chinese AI models, with DeepSeek leading the way, proved this year that they can stand up against American competitors. American investors face no barriers when buying public shares of Chinese companies working on AI.

“China is such a huge market,” said Jialong Shi, who heads China internet equity research at Nomura, a Japanese bank. “We are going to see increasing fund inflow from the U.S. investors,” he told the Wall Street Journal.

Tech giants see major stock gains

Stock prices for Alibaba, the internet company listed in both Hong Kong and New York, have jumped more than 80% this year, reaching a level not seen in four years. Alibaba announced plans to spend $53 billion across three years to expand AI infrastructure and work toward artificial-general intelligence, which means human-level intelligence.

America still leads in chasing that bigger goal and making the most powerful AI systems, and China cannot match its advanced computer chips. However, Chinese businesses have already started using AI in many different ways.

Investment firms run by American companies Vanguard Group, BlackRock and Fidelity have grown their ownership in Alibaba’s Hong Kong-listed shares this year, information from data provider LSEG shows. Shares in other Chinese technology firms, Tencent and Baidu, both of which are using large-language models that power generative AI, have also climbed nearly 50%.

Ruffer, an investment company based in London, believes listed Chinese technology giants still have room to grow because their price-to-earnings ratios are lower than American peers like Alphabet, which owns Google.

Attractive valuations draw investors

Ruffer’s portfolio, worth £19 billion, about $25 billion, which includes money from American investors, has grown nearly 11% this year. Alibaba, making up 1.5% of the whole portfolio, helped drive that growth, said Gemma Cairns-Smith, who works as an investment specialist at the company.

“China is a big player in AI,” Cairns-Smith said. “It does trade at a big discount to its U.S. counterparts,” she added, and “investors risk missing out.”

David Tepper, a billionaire who manages hedge funds, has openly supported Chinese companies this year. In November, Alibaba was the largest holding in his firm Appaloosa’s disclosed listed investments, representing 16% of about $7 billion in public stock investments, a securities filing showed.

BlackRock said in July that money moving into exchange-traded funds tracking China’s broader technology sector was moving faster than in the United States this year, with American investors making up 15% of the money going into China technology ETFs that month.

Two large funds following Chinese stocks have continued growing since July. The KraneShares CSI China Internet ETF based in New York increased by $1.4 billion to almost $9 billion, and the U.S.-listed Invesco China Technology ETF more than doubled to almost $3 billion, LSEG data shows.

Private investment remains cautious

International investors had mostly left China in recent years because of strict Covid-19 policies, government actions against technology companies, and a property market collapse that slowed economic growth.

American venture capital got tangled up in strained relations between the countries, and money for private Chinese companies fell sharply. Some venture firms with teams in both nations, like Sequoia Capital, had to separate their operations and change their names.

Even so, funds based in China have raised U.S.-dollar funds this year, trying to benefit from renewed excitement about China’s AI developments.

The Biden administration in January blocked investments into private Chinese companies in specific high-tech areas, including quantum computing and AI models above certain technical levels. Efforts to expand these limits are moving forward in Congress, even after Trump and Chinese leader Xi Jinping reached a trade agreement in October.

The National Defense Authorization Act, which the House approved on Wednesday, will let Trump add hypersonic-weapon technology to the banned list and require more information about how American investors are helping Chinese AI.

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