(Yicai) July 4 -- The investment pouring into China’s robotics startups in just the first five months of this year has already surpassed the total for the entirety of last year, with the bulk of funding directed at those companies developing embodied artificial intelligence.

China’s robotics sector raised CNY23.2 billion (USD3.2 billion) from January to May, eclipsing the CNY20.9 billion raised in 2024, according to data from market research firm IT Juzi. Eighty-seven percent of the funding went to companies working on embodied AI.

Yunshenchu Technology, a leading maker of quadruped robots, raised 10 times more than expected in its latest financing round, while humanoid robot firm Unitree Robotics resorted to invite-only for its fundraiser, leaving many interested investors shut out, Liu Tianjie, managing director of Huaying Capital, told Yicai.

Venture capital firms are being driven by FOMO -- the fear of missing out -- to grab a seat at the table, Liu said. But he cautioned that early-stage success rates are low, and even stellar startups such as Hangzhou-based Unitree still must prove their business models over the long term.

In a rare move, industry heavyweights are also rushing into the sector while it is still early days, Liu pointed out. Internet giants Meituan, ByteDance, Alibaba Group Holding, and Tencent Holdings have been joined by carmaker BYD and battery giant Contemporary Amperex Technology as early investors, he noted.

And while the robotics sector is still inits infancy, with no proven commercial applications, these big companies are investing based on their strategic business needs, according to Liu.

Feeling Undervalued

Despite investor enthusiasm, the founders of a good many Chinese robotics startups feel their valuations are unreasonably low. Figure AI and Physical Intelligence, both American companies, are valued at about USD39 billion and USD2.4 billion, while China's leading robotics businesses are valued in just the hundreds of millions of dollars, Wang Qian, who set up Independent Variable Robot Technology, pointed out.

The technical capabilities of China and the United States in embodied AI are not too far apart and the Asian country has a superior supply chain, so the valuation gap is unjustified, Wang said.

Drawing on his experience in the US and Shenzhen, Wang said that customizing a part in the Chinese city takes only a few days, whereas it might take months overseas. In addition, data collection costs in China are also far lower than in Europe and the US, he noted.

Lower valuations hinder the rapid development of China's embodied AI sector, with the most direct impact being that entrepreneurs are reluctant to invest heavily in researching and developing basic models, according to Wang.

Worth More

Embodied AI and humanoid robotics firms warrant valuations higher than those of smart car manufacturers and large language model developers, said Chen Jianyu, founder of Xingdong Era Technology. But the sector has yet to become as big as the smart car industry due to not finding a core, large-scale commercial application yet, he added.

Once a leading player achieves commercial scale, the industry may enjoy a second wave of valuation growth, Chen pointed out.

Entrepreneurs in embodied AI robotics are taking advantage of the investment frenzy to raise funds and launch initial public offerings, Wang said, adding that Woan Technology, Standard Robots, and MegaRobo began the listing process last month.

With the government intensifying its focus on the embodied AI sector and some of its businesses starting to meet IPO standards, three to five players may go public within the next three years, according to Liu.

Editors: Tang Shihua, Martin Kadiev