Raphael Stevens

More stories

  • 125 Shares173 Views

    in Business

    American Eagle says consumer is slowing down, issues weak guidance

    American Eagle said shoppers are pulling back on spending as it issued mixed holiday-quarter results.
    The apparel retailer beat on the bottom line and posted comparable sales that came in better than expected.
    “Entering 2025, the first quarter is off to a slower start than expected, reflecting less robust demand and colder weather,” CEO Jay Schottenstein said in a news release.

    American clothing and accessories retailer American Eagle store seen in Hong Kong.
    Budrul Chukrut | Lightrocket | Getty Images

    American Eagle warned investors on Wednesday that consumers are pulling back on spending and it’s seen a “slower start” to the year than it expected. 
    “Entering 2025, the first quarter is off to a slower start than expected, reflecting less robust demand and colder weather,” CEO Jay Schottenstein said in a news release. “While we anticipate improvement as the Spring season gets underway, we are also taking proactive steps to strengthen the top-line, manage inventory and reduce expenses. As we navigate through an uncertain consumer and operating landscape, we will also remain focused on our long-term strategic priorities.” 

    Shares fell about 5% in extended trading.
    The downbeat commentary, which came along with weak guidance for the current quarter and year ahead, is the latest warning sign that the consumer might be slowing down as shoppers contend with persistent inflation and concerns around tariffs.
    Over the past couple of weeks, a string of other retailers, including both strong companies and ones that tend to struggle, issued weak guidance and cautious commentary about the current macroeconomic conditions and warned 2025 might be a weaker than expected year for sales. 
    Beyond its outlook, American Eagle issued mixed holiday results and comparable sales that beat expectations. Here’s how the apparel company did in its fiscal fourth quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

    Earnings per share: 54 cents vs. 50 cents expected
    Revenue: $1.60 billion vs. $1.60 billion expected

    The company’s reported net income for the three-month period that ended Feb. 1 was $104 million, or 54 cents per share, compared with $6.31 million, or 3 cents per share, a year earlier.

    Sales dropped to $1.60 billion, down slightly from $1.68 billion a year earlier. Similar to other retailers, American Eagle benefited from an extra week in the year-ago period, which has negatively skewed results.
    Comparable sales, which don’t include the effect of one less selling week, were up 3% during the quarter, ahead of expectations of up 2.1%, according to StreetAccount. Aerie, American Eagle’s intimates and activewear line, drove the company’s growth during the quarter with comps up 6%. Meanwhile, the company’s namesake banner saw comparable sales up 1%.
    For the current quarter, American Eagle is expecting to see a mid-single-digit decline in sales, while analysts expected revenue to increase 1.3%, according to LSEG. For the full year, it is expecting sales to decline by a low single digit, compared with expectations of 3% growth, according to LSEG.
    On a call with analysts, finance chief Michael Mathias said Aerie sales are expected to be positive for the year but that growth will be offset by a steeper decline at the American Eagle banner.
    Tariffs are also expected to weigh on results, Mathias said. The company currently sources just under 20% of its products from China and is expecting a $5 million to $10 million hit from the new duties in fiscal 2025, which will also affect American Eagle’s gross margin. At the moment, the company isn’t planning on passing those costs on to the consumer and is working to get its China exposure down to under 10% by the end of the fiscal year, Mathias said.
    Over the past year, American Eagle has made significant strides in improving profitability but has seen slower sales growth. In the three prior quarters, it missed Wall Street’s sales expectations, and on Wednesday, it issued revenue numbers that were in line with analysts’ forecasts but didn’t exceed them. 
    During the quarter, the company acknowledged it had some product misses and had certain items that were out of stock, which affected sales, but American Eagle’s stores are also weighing on its results. The company still has a large mall footprint, and while there are some signals that malls are seeing a resurgence, traffic is still down significantly at U.S. malls, which means fewer people are coming into the retailer’s stores. For example, online sales are expected to be positive during the first quarter while store sales are expected to fall steeper than a mid-single-digit.
    To combat the effect of declining malls, rival Abercrombie & Fitch has worked to move its stores to locations outside of malls while American Eagle has been working to remodel its existing fleet. Currently, the company’s stores are on average 12 years old, and it’s working to get that down to seven. In fiscal 2024, it remodeled around 56 stores, and in the year ahead, the company plans to remodel between 90 and 100 doors as part of its $300 million capex guidance.
    In prior quarters, American Eagle has said it’s been contending with an uncertain economic environment and a consumer that tends to only come out and shop during key moments, but now a wide range of other retailers are reporting similar dynamics as cracks in the economy spread.
    In February, consumer confidence saw the biggest drop since 2021, job growth slowed more than expected and unemployment ticked up. These signals and the effect they’ve had on the markets have led to concerns that a recession could be coming, especially if President Donald Trump’s trade war with Canada, Mexico and China continues.
    A slowing economy is bad news for any retailer but especially those that primarily sell discretionary goods such as new clothes. During a call with analysts, Schottenstein shared his thoughts on the consumer and said the biggest thing affecting shoppers is uncertainty.
    “They have the fear of the unknown, not just tariffs, not just inflation. They see the government cutting people off. They don’t know how that’s going to affect them. They see programs being cut, they don’t know how that’s gonna affect them,” said Schottenstein. “They just don’t know how it’s gonna affect them … they get very conservative.”

    Don’t miss these insights from CNBC PRO More

  • 138 Shares115 Views

    in Finance

    Here’s the inflation breakdown for February 2025 — in one chart

    The consumer price index rose 2.8% in February from 12 months earlier, a deceleration from January.
    Steel and aluminum tariffs took effect Wednesday. Economists fear that an escalating trade war could stall or reverse progress on inflation.
    Eggs saw by far the highest inflation rate among other categories in February.

    A customer shops for eggs at an H-E-B grocery store on Feb. 12, 2025 in Austin, Texas. 
    Brandon Bell | Getty Images

    Inflation receded in February on the back of easing price pressures for consumer staples like gasoline, groceries and housing, amid worries that President Donald Trump’s tariff policies could stall progress.
    The consumer price index rose 2.8% for the 12 months ended in February, the U.S. Bureau of Labor Statistics reported Wednesday. That’s down from 3% in January.

    The deceleration is encouraging after fears in recent months that inflation had become entrenched and wasn’t falling back to target.

    “Progress is bumpy,” said Michael Pugliese, senior economist at Wells Fargo Economics. “It’s not a linear path down. There are still risks, but there are no signs of a reacceleration with the data in hand.”
    The consumer price index measures how quickly prices rise or fall for a basket of goods and services, from haircuts to coffee, clothing and concert tickets.
    CPI inflation has declined significantly from its pandemic-era high of 9.1% in June 2022. However, it remains above the Federal Reserve’s target. The central bank aims for a 2% annual rate over the long term.

    “Excluding any major policy changes, I’d expect [inflation] to continue gradually slowing,” Pugliese said. “Of course, the big question on everyone’s mind is, what are the big policy changes that will happen over the course of this year?”

    Trump imposed a fresh round of tariffs on foreign steel and aluminum imports on Wednesday, triggering retaliatory tariffs from Europe on about $28 billion of U.S. goods starting in April. The Trump tariffs follow on others he’s already imposed on Canada, China and Mexico, the three largest trading partners of the U.S.
    More from Personal Finance:’Wealthy tax dodgers’ could benefit from IRS layoffs, Democrats warnConsumer outlook sinks as recession fears take holdTrump says Education Dept. shouldn’t handle student loans
    Tariffs, a tax paid by U.S. importers, add costs for businesses that ultimately get passed to consumers, economists said. Steel tariffs, for example, could make steel-intensive items like cars, homes and machinery more expensive, they said.
    The president has proposed additional tariffs, though it’s unclear if they’ll take effect or for how long.

    Egg prices are up 59%

    Egg prices spiked by 59% over the past year, by far the largest increase for any item in February.
    An outbreak of avian flu — which is highly contagious and lethal among birds — has killed millions of egg-laying chickens and reduced egg supply, economists said. The U.S. Justice Department also opened an investigation into potential antitrust issues related to the surging price of eggs, according to news reports.

    The price of instant coffee has also increased about 9% in the past year, according to the CPI data. Weather patterns like droughts fueled by climate change have disrupted major coffee growers including Brazil, reducing supplies of coffee beans.
    Overall, though, inflation for groceries is relatively low, at 1.9% in the past 12 months.

    Gasoline inflation was also tame in February. Prices were down 1% from January to February, and down 3% in the past year, according to CPI data.
    Shelter is the largest component of the CPI, and movements up and down can have a significant impact on overall inflation readings. Annual inflation for shelter was at 4.2% in February, the lowest since December 2021.
    “Housing inflation is historically the ‘stickiest’ component of inflation, meaning it takes longer to buck price trends,” Gargi Chaudhuri, BlackRock’s chief investment and portfolio strategist for the Americas, wrote in an emailed note Wednesday. “The recent trend in housing prices keeps us optimistic on the future trajectory of inflation.”
    Correction: The consumer price index was down from 3% in January. An earlier version misstated the timing.

    Don’t miss these insights from CNBC PRO More

  • 63 Shares164 Views

    in Finance

    What sparks an investing revolution?

    What prompts a revolution? When it comes to investing, no change has been as great as that produced by researchers at the University of Chicago in the 1960s. Their financial-theory revolution changed the way that almost everyone invests, making speculators many trillions of dollars in the process. More

  • 138 Shares183 Views

    in Business

    Take a look inside the world’s largest 3D printed housing development

    Lennar and Icon, a 3D technology company, partnered to print 100 homes in Georgetown, Texas. The real estate company says about 75% of them have already sold.
    The homes have all the amenities of a conventionally built Lennar community. They come in 2- and 3-bedroom models and start at just under $400,000.
    The companies are planning a second development in Texas, with more homes and at lower cost.

    Just outside Austin, in Georgetown, Texas, brand new planned communities sprawl out as far as the eye can see, which is pretty far in this part of the country. But one small subdivision instantly draws focus. Just completed, it is now the world’s largest 3D-printed community.
    Two years ago, Lennar, the nation’s second-largest homebuilder, partnered with Icon, a 3D technology company, to print 100 homes in the Wolf Ranch development. The companies say about 75% of them have already sold.

    All the walls have rounded edges, as that’s how the printers navigate with the concrete. The layering process makes it feel like hard, wide-wale corduroy. The roofing is the only part of the structures not 3D-printed, and, in this community, is made of metal. Each home is solar-powered.

    Lennar and Icon 3D printed homes.
    Diana Olick | CNBC

    “We have a durable product here that if you look at its wind resistance for hurricanes, its fire resistance for fire-worn areas — the ability to adapt modern product to what we need for the future in housing and building a healthier housing market is amazing,” said Stuart Miller, chairman and co-CEO of Lennar.
    Icon started the project at Wolf Ranch in 2022, using two 40-foot robotic printers. By the second year, the company was using 11 machines, cutting print time in half and squeezing out two homes per week. Each printer does the job of more than a dozen construction workers. The systems operated 24 hours a day.
    “All the learnings about this technology need to happen at scale,” said Jason Ballard, CEO of Icon. “The truth is in the field, not in the lab.”
    Ballard said his team had to work out large-scale logistics with Lennar’s teams, everything from laying foundations to printing walls, installing interior systems and adding roofing.

    “Figuring out how to integrate with Lennar’s operations, who are probably the best scale builders in the world, was a real growing up moment for our company,” Ballard said.

    Lennar and Icon 3D printed homes. 
    Diana Olick | CNBC

    The homes have all the amenities of a conventionally built Lennar community. They come in 2- and 3-bedroom models and start at just under $400,000.
    Holly Feekings and her husband, both retired, moved into their 3D-printed home about a year ago. She said the best part of living in the printed home is her electric bill — just $26 last month. Concrete retains its temperature, heat or cold air, better than her previous standard colonial, Feekings said. She also likes the home’s durability.
    “I feel safer in this house than any house I’ve ever lived in, because it’s so well built, it’s not going to burn down,” said Feekings.
    Around the corner, Pierre Megie and his girlfriend were drawn in by the look and feel of the home.
    “We wanted tall doors, taller ceilings, cement floors, somehow, and this home had everything. Really just a combination of energy efficiency, the practicality, the price point, and then the aesthetics,” said Megie.

    Lennar and Icon 3D printed homes. 
    Diana Olick | CNBC

    The community was an experiment for Lennar. The cost to stand it up, according to Miller and Ballard, was slightly higher than anticipated as they worked through the kinks.
    Miller said Lennar is now planning its second 3D-printed community in Texas with Icon, roughly 200 homes, which will cost even less to build, given what the companies learned in Georgetown. The next community will have larger homes, and Ballard expects them to go up even faster, and cheaper.
    “We’ve seen our costs go down by half. We’ve seen our cycle time go down by half. This is significant improvement in evolving a housing market that has the ability to change over time and being more adaptable and more functional in providing affordable and attainable housing for a broader swath of the market,” said Miller.
    As for the rising risk of tariffs between U.S. and trade partners, Ballard said all of the concrete his company uses is sourced stateside. More

  • 163 Shares125 Views

    in Business

    RFK Jr. pressures Big Food to remove artificial dyes in meeting with CEOs

    Health and Human Services Secretary Robert F. Kennedy Jr. told food executives that removing artificial food dyes is an urgent priority.
    Attendees of the meeting with Kennedy included the CEOs of PepsiCo North America, Kraft Heinz, General Mills, Tyson Foods, W.K. Kellogg and J.M. Smucker.
    In January, the Food and Drug Administration revoked its authorization of one type of red food dye called Red No. 3.

    Robert F. Kennedy Jr., U.S. President Donald Trump’s nominee for Secretary of Health and Human Services testifies during his Senate Finance Committee confirmation hearing at the Dirksen Senate Office Building on January 29, 2025 in Washington, DC. 
    Win Mcnamee | Getty Images News | Getty Images

    Health and Human Services Secretary Robert F. Kennedy Jr. told top food executives on Monday that he wants “the worst ingredients” out of food and is willing to take action to get rid of them.
    Removing artificial dyes from the food system is an urgent priority of the Trump administration, and Kennedy said he wants to do so by the end of his time in office, according to a memo summarizing the meeting sent by the Consumer Brands Association that was viewed by CNBC. While Kennedy said he wanted to work with the food industry, he also “made clear” that he would take action if the industry wasn’t proactive.

    “It was a constructive conversation and we look forward to continued engagement with the secretary and the qualified experts within HHS to support public health, build consumer trust and promote consumer choice,” Consumer Brands Association CEO Melissa Hockstad said in a statement to CNBC.
    Meeting attendees included the CEOs of PepsiCo North America, Kraft Heinz, General Mills, Tyson Foods, WK Kellogg, J.M. Smucker and the Consumer Brands Association, the industry’s top trade group.
    “We appreciate the Secretary taking the time to sit down with us and view the meeting as a productive first step in working with the Administration,” a PepsiCo spokesperson said in a statement to CNBC.
    Bloomberg first reported details of the meeting.

    Froot Loops cereal, sold in Canada and made with natural dyes, left, and Froot Loops cereal, sold in the US and made with artificial dyes, arranged in the Brooklyn borough of New York, US, on Wednesday, May 22, 2024. 
    Lucia Buricelli | Bloomberg | Getty Images

    Kennedy is at the helm of a $1.7 trillion agency that oversees food and tobacco products, vaccines and other medicines, scientific research, public health infrastructure and government-funded health care.

    His so-called Make America Healthy Again platform argues a corrupt alliance of drug and food companies and the federal health agencies that regulate them are making Americans less healthy. He has pledged to end the chronic disease epidemic in children and adults, and has been vocal about making nutritious food, rather than drugs, central to that goal.
    In January, before President Donald Trump or Kennedy took office, the Food and Drug Administration revoked its authorization of one type of red food dye called Red No. 3. The dye is known to cause cancer in laboratory animals, but was allowed to be used by food manufacturers for years because scientists didn’t believe it raised the risk of cancer in humans at the level it is typically consumed.
    Kennedy, a notorious vaccine skeptic, is also making early moves that could impact immunization policy and further dampen uptake in the U.S. at a time when childhood vaccination rates are falling. He has said he will review the childhood vaccination schedule, and is reportedly preparing to remove and replace members of external committees that advise the government on vaccine approvals and other key public health decisions, among other efforts. More

  • 150 Shares164 Views

    in Business

    Boeing plane prices could increase by millions with tariffs, says AerCap CEO

    A person walks past an unpainted Boeing 737-8 MAX parked at Renton Municipal Airport adjacent to Boeing’s factory in Renton, Washington.
    Jason Redmond | AFP | Getty Images

    AerCap CEO Aengus Kelly said a worst-case tariff scenario could move Boeing prices up by $40 million.
    Kelly also said his company has seen a “marked improvement” in Boeing products over the past couple of years.

    The price of a Boeing 787 plane could increase by $40 million in a worst case tariff scenario, AerCap CEO Aengus Kelly said.
    “In an absolute worst case scenario, say, a 25% increase across the board on tariffs, a tit-for-tat from both sides — a Boeing 787, the price will go up by $40 million,” Kelly said Wednesday on CNBC’s “Squawk Box.” “No one’s going to want to pay that.”

    In that kind of scenario, Kelly said most airlines would instead likely turn to Airbus, which could give that company an opportunity to take 75% to 80% of the global market.
    AerCap, the world’s largest aircraft leasing company, bought 150 aircraft, helicopters and spare engines last year from Boeing, Kelly added.
    Though it’s too early to determine exact impacts of rising tariff tensions, the global economy has been reacting to President Donald Trump’s plans, with the latest addition of 25% tariffs on steel and aluminum imports coming into effect Wednesday, resulting in swift counter-measures from the European Union.
    Despite a chaotic year of troubles for Boeing, Kelly said Aercap, which is the biggest buyer of aviation assets in the world, has seen a recent improvement in the quality, reliability and safety of products out of Boeing.
    Looking to 2025 for Boeing, Kelly emphasized that what the manufacturer really needs is cash to deliver aircraft reliably. Despite a rocky year for the plane maker, Kelly said he has “never had a hesitation” about getting on a Boeing aircraft and that the company’s manufacturing process has improved considerably.

    “Boeing has made tremendous steps in terms of quality, safety and reliability over the last year,” Kelly said. “We see it because we’re on the shop floor buying airplanes every day.”
    Kelly also said despite worries of an air travel recession and weaker demand from Delta Air Lines earnings, he remains bullish, with the company continuing to see strong demand overall. The current “soft patch,” he said, has been driven by labor costs. More

  • 138 Shares144 Views

    in Finance

    China says it’s willing to cooperate with the U.S. on fentanyl

    China is willing to do more to address White House concerns about illicit fentanyl trade, but it will be “a different thing” if ongoing debate over the drug facilitates more U.S. tariffs on the world’s second largest economy, an official from the Chinese Ministry of Foreign Affairs told reporters Wednesday.
    The U.S. should have “said a big thank you” to China on what it has done to restrict fentanyl, the official said, claiming the U.S. did not appreciate the effort and instead raised tariffs on Chinese goods twice this year over the fentanyl issue.
    Since taking office in January, U.S. President Donald Trump has increased tariffs on Chinese goods by 20% on the basis of the country’s alleged role in the U.S. fentanyl crisis.

    China’s and U.S.’ flags are seen printed on paper in this illustration taken January 27, 2022. 
    Dado Ruvic | Reuters

    BEIJING — China is willing to do more to address White House concerns about illicit fentanyl trade, but it will be “a different thing” if ongoing debate over the drug facilitates more U.S. tariffs on the world’s second largest economy, an official from the Chinese Ministry of Foreign Affairs told reporters Wednesday.
    Washington should have “said a big thank you” to China on what it has done to restrict fentanyl trade in the U.S., the official said via an official English translation, claiming the White House did not appreciate the effort and instead raised duties on Chinese goods twice this year over the drug.

    Since taking office in January, U.S. President Donald Trump has increased tariffs on Chinese goods by 20% on the basis of the country’s alleged role in the U.S. fentanyl crisis. The addictive drug, precursors to which are mostly produced in China and Mexico, has led to tens of thousands of overdose deaths each year in the U.S.
    The White House did not immediately respond to a CNBC request for comment.
    Earlier this month, the Chinese government published a white paper to publicize its efforts to curtail the production and export of fentanyl precursors over the last few years. The official did not respond directly to a question on whether China would stop its recent efforts to restrict such trade.
    Under the Biden administration, the U.S. and China had said fentanyl was one of the few areas in which the two countries could cooperate. Both sides held dedicated talks in Beijing last year on the topic.

    Trump indicated earlier this year that he could also use tariffs as a way to pressure China into forcing Beijing-based ByteDance to sell TikTok, which is running against an early April deadline to remain available in the U.S.

    Trump had emphasized tariffs as a way to reduce the U.S. trade deficit with China during his first presidency. Just before the onset of the Covid-19 pandemic, the two sides reached a “Phase One” trade agreement requiring Beijing to increase its purchases of U.S. goods. U.S. data shows that the trade deficit with China narrowed to $295.4 billion in 2024, from $346.83 billion in 2016, just ahead of Trump’s first mandate.
    But differences on trade have continued since the January start of the White House leader’s second mandate. The average effective U.S. tariff rate on Chinese goods is now set to hit 33%, up from around 13% before Trump began his latest term, according to estimates from Nomura’s Chief China Economist Ting Lu.
    Beijing has responded to the latest U.S. tariffs with targeted duties on energy and agriculture products, while tightening restrictions on exports of critical minerals that the U.S. needs. China’s Ministry of Commerce has also added several U.S. companies, mostly in aerospace or defense, to lists that limit their ability to do business with China.
    The Ministry of Foreign Affairs official said Wednesday that China’s countermeasures were “legitimate actions” to protect its own interests.
    Allianz estimates the additional 20% U.S. tariffs on Chinese goods would hit China’s GDP growth by 0.6 percentage points this year and next. But the firm still expects the Chinese economy to grow by 4.6% this year and 4.2% in 2026, based on the assumption that stimulus can mitigate the tariff impact.
    “I would tend to say the retaliation is not so strong, maybe leaving room for negotiations,” Francoise Huang, senior economist for Asia-Pacific and global trade at Allianz Trade, said in a CNBC interview last week. More

  • 125 Shares185 Views

    in Finance

    DeepSeek AI cranks open the spigots on Chinese venture capital

    DeepSeek’s artificial intelligence breakthrough has led to an “avalanche” of interest in Chinese tech firms over recent months.
    It could mark a much-needed boost for the country’s investment landscape. VC investment into China-based companies has fallen for the last three years, according to Pitchbook data.
    “People are rushing just to find the next DeepSeek,” said Annabelle Yu Long, founding and managing partner of BAI Capital in Beijing.

    Dado Ruvic | Reuters

    BEIJING — DeepSeek’s artificial intelligence breakthrough is stirring up China’s venture capital world after three straight years of decline.
    As DeepSeek released its OpenAI rival in late January, AI drug discovery company Insilico Medicine was finalizing a $110 million series E financing round led by Hong Kong-based Value Partners, the startup’s CEO and founder Alex Zhavoronkov told CNBC in an exclusive interview. The deal closed last month.

    But so many Chinese funds wanted to participate at the last minute — “like an avalanche” — that Insilico is planning a series “E2” raise, Zhavoronkov said. “We have never seen this level of interest before.”
    Qiming Ventures-backed Insilico uses AI from DeepSeek and other companies to create models for developing drugs. Ten of the startup’s drugs have already received approval for clinical tests, according to Insilico, which lists research labs in China, the U.S. and the Middle East.
    Zhavoronkov added that during his U.S. travels in the last few weeks, many U.S. and other global investors have asked him about ways to invest in Chinese AI companies.
    “It looks like the DeepSeek moment, it created a lot of interest from global investors to invest in China,” he said Monday. “I think the funding is going to come back.”

    Regulatory uncertainty in both China and the U.S., especially around IPOs, and slow economic growth have contributed to a sharp drop in Chinese venture capital activity in recent years. VC investment into China-based companies has fallen for the last three years, reaching just $48.86 billion in 2024, the lowest on record going back to at least 2016, according to Pitchbook data.

    Now, as regulatory clarity emerges, sentiment is changing — and encouraging investors to take a different approach to the past, when internet-based startups such as Alibaba emerged.
    “People are rushing just to find the next DeepSeek,” said Annabelle Yu Long, founding and managing partner of BAI Capital in Beijing. She also sits on the board of Coach parent Tapestry.
    “Everybody is making investments, but I am asking my team to hold on new deals, because we see our core portfolio [of around 6 companies] are gaining very, very meaningful AI traction,” she said, noting that her firm is opting to increase its investments in existing holdings in coming months.
    Part of her call stems from her view that Chinese funds have far less capital than U.S. ones to invest in AI, requiring a targeted approach. Instead of looking at new startups, Long said she expects entrepreneurs who are already using AI well to succeed in the near future.
    For example, BAI Capital-backed Black Lake, which sells manufacturing management systems, has become profitable this quarter because AI has lowered service costs, Long said. Another of her investments, a healthcare company called Lejian, has become more profitable with the help of AI, and Goldman Sachs is preparing its IPO, she added.
    Long said she plans to list nine portfolio companies this year, mostly in Hong Kong, and has received many calls from international investors about China’s economy and Chinese entrepreneurship beyond AI. “I definitely see a return of confidence.”
    Other recent investment rounds also reflect how capital is piling into existing players. Insilico’s Zhavoronkov said some Chinese investors had previously lost nearly all their money on AI drug startups, and now recognize that only a few, likely more established, players will make it.
    This month, AI model company Zhipu AI raised the equivalent of around $137.68 million from Alibaba Cloud and a Hangzhou city-backed fund, according to PitchBook’s records of 12 AI deals for the first 10 days of March. The data also showed robotics company LimX Dynamics raised an undisclosed amount from Alibaba Group and other investors.

    A holiday turning point

    China’s Lunar New Year in late January marked a turning point for AI investment. DeepSeek’s R1 model came out just before the holiday, while state media’s widely broadcast Spring Festival gala showcased dancing robots from Unitree.
    “I think Unitree and DeepSeek encourage a lot of foreign investors to try to seek opportunities here,” said Hongye Wang, executive director at Shenzhen-based Forebright Capital, which has funds denominated in the U.S. dollar and Chinese yuan. He noted that some Middle East funds have recently been looking for opportunities in Chinese AI companies.
    “I believe confidence [is] coming back,” he said of domestic VCs, noting many were traveling again for meetings.
    Wang said his firm has invested in a company that makes cellphone chargers and AI glasses, and is looking for opportunities in humanoid robots, along with companies that provide solutions for computing reasoning. Forebright, which Wang says has several billion U.S. dollars in assets under management, plans to make at least five to six investments this year, he said.

    Policy support

    Importantly for a market that’s been hit by regulatory crackdowns, Beijing is signaling clear support.
    “The fact that President Xi [Jinping in February] shook the hand of DeepSeek’s founder and pretty much gave the green light for generative AI to be used at scale, now you should expect a massive number of DeepSeek-like clones … that will be popping out and just disclosing what they have been doing over the past three years,” Zhavoronkov said.
    Premier Li Qiang’s work report last week said China would work to “accelerate the development of venture capital investment and the growth of patient capital,” referring to long-term investment.
    A day after Li presented that plan, Zheng Shanjie, head of the National Development and Reform Commission, told reporters the central government is planning a fund that’s expected to mobilize 1 trillion yuan ($137.7 billion) for tech investment. Central bank governor Pan Gongsheng announced at the same press conference that a loan program for tech innovation would nearly double to as much as 1 trillion yuan.
    “From early stage investment to exit, policy is more complete and clearer,” Liu Rui, vice president of China Renaissance Capital, said in Mandarin, translated by CNBC.
    He expects more resources to go toward AI applications this year, given the faster-than-expected decline in model operating costs and China’s large consumer base.
    Tensions with the U.S. — ranging from tariffs to tech restrictions — remain a hurdle for international investors contemplating China AI opportunities, however.
    Unlike U.S.-based companies that can access the global market, China-based ones will also likely find it harder to expand abroad given the sensitivities around AI and data, said Xuhui Shao, Palo Alto-based managing partner at Foothill Ventures. His firm focuses on the U.S. and doesn’t invest in China.
    Even with the potential of China’s large market, foreign investors need to understand the risks of investing in China, such as restrictions on capital flow, Shao said. But he pointed out that “innovative breakthroughs” such as DeepSeek shouldn’t be a surprise given that China has many college-educated engineers and data scientists, who can represent half of the AI researchers at an industry conference.
    “I think,” he said, “competition always pushes the whole sector [to move] forward and technology would not be contained by borders.” More