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U.S. investors have plowed billions into China's AI sector, report shows

By Alexandra Alper

WASHINGTON, Feb 1 (Reuters) - U.S. investors including the investment arms of Intel Corp and Qualcomm Inc accounted for nearly a fifth of investments in Chinese artificial intelligence companies from 2015 to 2021, a report showed on Wednesday.

The document, released by CSET, a tech policy group at Georgetown University, comes amid growing scrutiny of U.S. investments in AI, Quantum and semiconductors, as the Biden administration prepares to unveil new restrictions on U.S. funding of Chinese tech companies.

According to the report, 167 U.S. investors took part in 401 transactions, or roughly 17% of the investments into Chinese AI companies in the period.

Those transactions represented a total $40.2 billion in investment, or 37% of the total raised by Chinese AI companies in the 6-year period. It was not clear from the report, which pulled information from data provider Crunchbase, what percentage of the funding came from the U.S. firms.

Qualcomm Ventures and Intel Capital were involved in 13 and 11 investments in Chinese AI companies respectively, outpaced by GGV Capital which led U.S. firms with 43 total investments in the sector, the data showed.

The Biden administration is expected to unveil an executive order this year curbing some U.S. investments in sensitive Chinese tech industries, as hawks in Washington blame American investors for transferring capital and valuable know-how to Chinese tech companies that could help advance Beijing's military capabilities.

According to the report, U.S. investor GSR Ventures invested alongside China's IFlytek Co Ltd in a Chinese AI company after the speech recognition firm was added to a trade blacklist. Silicon Valley Bank and Wanxiang American Healthcare investments group made investments in Chinese AI firms alongside China's Sensetime before the powerhouse in facial recognition technology was added to the same trade blacklist.

Both companies were added to the blacklist, which effectively bars them from receiving U.S. tech exports, in 2019 for alleged human rights violations related to the repression of Uighur Muslims.

Some of the largest investments include Goldman Sachs' solo investment in 1KMXC, an AI-enabled robotics company, as well as an investment by three U.S.-based VC firms in Geek+, an autonomous mobile robot company, the report showed.

Only one Chinese AI company that received funding from U.S. investors is involved in developing AI applications for military or public safety uses, according to CSET. (Reporting by Alexandra Alper; Editing by Stephen Coates)