Asia: Q2'26 Venture Pulse Report

VC investment in Asia reached $50.8 billion across 2,676 deals in Q2’26, its strongest quarter since Q4’21. The rebound was propelled by large deal activity in China, including a number of $1 billion-plus funding rounds.

Q2'26 highlights for Asia

VC-backed companies in Asia raised $50.8 billion across 2,676 deals
Q2’26 was Asia’s strongest quarter since Q4’21
AI, robotics, semiconductors, infrastructure, advanced manufacturing and alternative energy attracted significant investment
China’s VC market continued to rebound, reaching $35.1 billion in Q2’26
Government and corporate capital played an outsized role in large financings
India remained relatively steady quarter-over-quarter, supported by $100 million-plus megadeals including KreditBee and Skyroot Aerospace

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AI drives VC investment across Asia

AI was the most active area of VC investment across much of Asia during Q2’26, spanning large and small language models, robotics, embodied AI, infrastructure and practical industry solutions. China attracted the largest share of AI-focused investment, led by DeepSeek’s $7.4 billion raise, ByteDance’s $3 billion raise, Stepfun’s $2.5 billion raise and Moonshot AI’s $2 billion raise.

China continues to strengthen

VC investment in China continued to rebound in Q2’26, reaching $35.1 billion — levels not seen since 2021. AI, deeptech, hardware, advanced manufacturing and alternative energy attracted the most investor interest, aligned with key government priorities. In addition to major AI raises, China saw sizable rounds in automotive, battery technology and robotics, including Landian Technology, Jiangsu Guoxuan New Energy Technology, AI2 Robotics and Sudu Technology.

Governments take an active role in investment

Government funds continued to play a key role in Asia, particularly in semiconductors, compute power and spacetech. This reflects broader commitments to sovereign technology capabilities, AI infrastructure and localized critical supply chains. In Q2’26, DeepSeek’s raise included a significant investment from China’s National Artificial Intelligence Industry Investment Fund, while Japan’s Innovation Platform Agency invested an additional $943 million in semiconductor manufacturer Rapidus.

Japan remains selective as public-private support deepens

VC investment in Japan remained relatively soft in Q2’26 as investors continued to take a cautious and selective approach to deployment. Industry-embedded AI solutions, particularly those aimed at enhancing manufacturing and pharmaceutical development processes, continued to attract interest. At the same time, government and corporate support for deeptech, semiconductors and AI remained important to the market’s longer-term development.

Exit environment remains uneven across the region

Exit activity across Asia remained uneven in Q2’26. IPO activity in the Hong Kong (SAR) and Chinese Mainland remained robust, supported by a strong pipeline of candidates, while Japan’s exit environment stayed exceptionally weak amid sluggish IPO activity and changes to Tokyo Stock Exchange Growth Market listing rules. Across the region, public listings continued to account for the bulk of exit value.

Trends to watch for in Q3’26

Heading into Q3’26, AI is expected to remain a robust area of investment in Asia, with investors increasingly focused on robotics, embodied AI and industry-specific solutions. China’s momentum is expected to continue, driven by investment in government priority sectors, although the rising cost of AI could influence where investors choose to allocate capital. In Japan, funding is likely to remain concentrated on high-quality leading companies, which could make it harder for less mature startups to attract investment.

Looking at the first six months of the year, we’re seeing numbers revert back to levels we haven’t seen since 2022. Market activity is booming — in hardware, AI, advanced manufacturing, energy and other key areas. It’s amazing. AI has definitely been a major driver of this activity because so much of the investment we’re seeing is linked to it in some way, whether in robotics or semiconductors. Over the next six months, it will be good to see this momentum continue.

Zoe Shi

Partner

KPMG China