US venture-capital firm Eight Roads is planning to divest its stakes in approximately 40 Chinese tech start-ups, marking a significant exit from the market due to geopolitical tensions and a sluggish Chinese economy.

This decision reflects a broader trend of global investors retreating from the Chinese market, as highlighted by similar moves from firms like GGV Capital.

Eight Roads, linked to the Johnson family of Fidelity Investments, has invested around US$1.1 billion in about 130 Chinese companies, including early investments in major firms like Alibaba.

According to a KPMG report, venture-capital financing in China fell to US$6 billion in the first quarter of 2025, primarily due to economic uncertainties and challenges in the real estate sector.

The exit of US venture capital from Chinese tech suggests a significant decoupling in the tech sector, which may create a more challenging funding environment for Chinese startups reliant on domestic capital.

The stakes in the start-ups are expected to be sold at a significant discount, potentially between 60% to 80% of their peak combined valuation of around US$1 billion.

Notably, the divestment includes shares in self-driving car company Pony.ai, which are currently held due to a lock-up period.

Limited partners, such as US pension funds and university endowments, are pressuring VC firms to reduce their exposure to Chinese technology investments, contributing to the decline in funding for China-focused funds.

This move was reported by Bloomberg on June 10, 2025, and underscores the growing caution among investors regarding the Chinese market.

Despite growth in China's AI industry, particularly from startups like DeepSeek, the overarching political risks are prompting firms like Eight Roads to withdraw their capital.

The assets sold by Eight Roads are expected to attract interest from Chinese tech-focused investors, potentially shifting the funding landscape towards domestic capital and promoting technological self-sufficiency in China.

This trend of US venture capital withdrawal is further exemplified by Sequoia Capital's strategic separation of its global brand into three independent entities in 2023.