(Yicai) April 24 -- China’s private equity market is showing a sharp split. “Hard tech” industries such as robotics and advanced materials are attracting most of the capital, while previously popular areas such as second-hand e-commerce and apparel have seen funding drop by over 90 percent in the past five years, according to the latest data.

The robotics sector alone raised CNY58.8 billion (USD8 billion) last year, Yang Xiaolei, chief executive officer of Chinese private equity firm ChinaVenture Group, said at a recent industry forum. The number of funding events in the sector quadrupled between 2021 and 2025 while the number of financing deals tripled. Other hard tech segments, including drones and new materials, also saw their funding double over the period.

Meanwhile, more than 50,000 companies, mostly in sectors such as entertainment, finance and traditional manufacturing, have not secured any follow-on funding since 2019, according to Chinese business information service provider IT Juzi.

Since 2021, it can take up to seven years for gaming and animation companies to move from Series B to Series C rounds, Yang said. By contrast, Nova Fusion, a nuclear fusion startup, bagged CNY1.2 billion (USD175.5 million) in two funding rounds within one year of being established. And embodied intelligence firm Spirit AI managed to raise CNY3 billion in just 30 days.

This stark divergence is even starting to “hold investment firms hostage.” Some companies now require investors to commit to the next round when investing in the current round, said Wang Lin, founding partner of CDH Investments. There are also companies that require a deposit upfront just to access the investor list.

Artificial intelligence is a multi-decade megatrend that will shape the next 30 to 50 years, said Kuang Ziping, founding managing partner of Qiming Venture Partners. The market and commercial applications are still in their early stages, with plenty of room for new business models and paradigms to be explored, he said. AI investment opportunities will only continue to grow both in scale and scope.

Valuations in many popular sectors may already be at a cyclical peak, which is a period when bubble risks become more evident, said Chang Junsheng, director and general manager at CITIC Goldstone Investment. If the capital market experiences another five-year bull run, it would mean that investments made today will likely exit during a trough period, he added.

Another underlying logic of AI investment is that AI can transform traditional industries, which means that there are investment opportunities in fields that currently seem “out of favor” or less attractive at first glance, Chang said.

Editor: Kim Taylor