Wall Street’s Role in AI Funding Amidst China-Tensions
Major banks on Wall Street are not only fueling the artificial intelligence (AI) boom in the U.S. but are also raising significant sums for Chinese firms that are looking to bolster their AI and semiconductor industries. It’s kind of a mixed bag, right?
This year, firms like Goldman Sachs, Morgan Stanley, Citigroup, and JPMorgan have been heavily involved in various high-tech offerings in China, all while the U.S. government attempts to limit Chinese access to sensitive technology. These banks played key roles as bookrunners on 19 high-tech equity deals in China, which amounted to around $17.2 billion, making up nearly a third of the total market for these offerings, according to data from LSEG as reported by Reuters.
In a notable instance, Goldman Sachs, Morgan Stanley, and Citigroup were part of the global coordination for Zhongji Innolight, a Chinese company that focuses on optical components. They helped facilitate a $6.8 billion share offering in Hong Kong this summer, which is notable given that the U.S. Department of Defense had just added Zhongji to its list of companies linked to the Chinese military. Interestingly, despite this designation, Zhongji claimed that their U.S. orders and business operations were unaffected.
Morgan Stanley and Goldman Sachs also assisted in offerings for other Chinese AI entities including MiniMax and semiconductor companies like Montage Technology and Shanghai Iluvatar CoreX Semiconductor.
JPMorgan even marked its territory in another aspect of this dynamic by acting as a joint sponsor for Victory Giant Technology’s global offering in Hong Kong. This company, which produces circuit boards for AI servers, raised about $2.6 billion through the deal.
In the U.S., tech firms have been increasingly leaning on bonds, banks, and private lenders to finance the development of the data centers and infrastructure necessary for AI. Goldman Sachs indicated that by August 2026, close to $500 billion in AI-related debt had been issued.
There’s a substantial projected expenditure, too. JPMorgan anticipates that the five largest U.S. hyperscalers will spend around $697 billion on capital expenses in 2026 as they rush to expand their computing capabilities.
Even amid rising concerns in Washington over national security issues related to Chinese advancements in AI and semiconductors, the financial ties between the two countries have remained strong. The Treasury Department has established an Outbound Investment Security Program that targets specific U.S. investments in semiconductors, AI, and other technologies involving China, Hong Kong, and Macau. While some transactions are barred, others still allow for Wall Street interactions with Chinese firms.
The guidelines suggest that American investment banks providing underwriting services for initial public offerings (IPOs) by certain identified Chinese firms generally aren’t considered to be conducting forbidden transactions unless they acquire a covered equity interest. Plus, there’s an exemption for qualifying investments in publicly traded securities.
This connection has drawn attention from legislators in the past. For example, the House Select Committee on the Chinese Communist Party issued subpoenas to JPMorgan’s Jamie Dimon and Bank of America’s Brian Moynihan in 2025 related to their roles in the IPO of the Chinese battery manufacturer Contemporary Amperex Technology Co. Limited (CATL), which has faced scrutiny for alleged military links.
Interestingly, capital flows are also moving the other way. U.S. stocks make up nearly half of the approximately 1 trillion yuan (about $150 billion) managed by Chinese mutual funds investing abroad. Furthermore, Chinese investors have been increasing their stakes in U.S. semiconductor firms like Micron Technology and AMD.
In a broader sense, the value of U.S. AI funding rounds that involve Chinese or Hong Kong investors surged from about $436 million in 2023 to approximately $8.9 billion by mid-September 2026, according to S&P Global Market Intelligence.
Around this time, President Donald Trump and Chinese leader Xi Jinping were expected to meet for a state dinner at the White House, presumably discussing these tangled economic relationships.
