Where Is China Winning?

Market Overview

A muted week for markets. Markets entered a shortened holiday week with little significant momentum despite some major macro activity, including a US military buildup in the Middle East. They rallied slightly on Friday morning after the Supreme Court overturned President Trump’s tariffs but were basically flat on the week. Year-to-date, the S&P/Nasdaq are also basically flat, while our NPM Private Market Tracker*, which shows the average price performance of the 50 largest names in our internal Tape D® data, is up 1.0% YTD.

Where Is China Winning?

When we look at the major private market industries of AI, robotics, space and defense, investors appear to be focused on companies that are either developing technologies and projects in these areas or providing the inputs for them (chips, power, critical minerals). Our market tends to have a highly North American (and, to a lesser extent, European) focus, but we often hear questions about company positioning vis-à-vis China, whether as a competitor or as part of the supply chain. This week, we take a look at where China stands in key areas of these sectors – it’s a reminder of both what companies in our universe are up against and how we can judge their competitive moats.

Semiconductors: China lags in design, fabrication and manufacturing equipment. China has around one-third of global market share in legacy chips, but it’s estimated to be about five years behind global leaders in high-volume, leading-edge logic chips, and NVIDIA still dominates advanced AI GPUs worldwide (Information Technology and Innovation Foundation). China is also behind on manufacturing these chips – NVIDIA outsources its manufacturing (primarily to TSMC in Taiwan), but US chip controls restrict NVIDIA sales to China and also TSMC’s ability to manufacture for Chinese companies. SMIC, Chinas leading chip fabricator, and Huawei, China’s leading chip designer, are racing to catch up and their technological performance gap has narrowed, but they are not at the point of mass production (CNBC).

A key hindrance to China’s chip manufacturing capability is its ability to import advanced chip manufacturing equipment. The Netherlands’ ASML is the world’s leading supplier of advanced chipmaking equipment, and its government has agreed to block the sale of ASML’s most advanced lithography machines to China (Reuters). Chinese suppliers are using lower-end equipment to produce chips and stitching together larger numbers of lower-end chips in order to compensate for their lack of high-quality manufacturing equipment and design (CNBC).

Robots: China has a huge installed base of factory robots, and its humanoid industry is growing quickly. In contrast to semiconductors, China has a large, home-grown factory robotics industry. There were more than two million robots working in Chinese factories in 2024, and factories there installed 300,000 new robots that year, more than the rest of the world combined (New York Times). These numbers do not include humanoid robots, which are what US companies such as Figure AI, Agility Robotics, Tesla, 1X, Boston Dynamics and Apptronik are developing. Still, the government has included developing a humanoid robot industry as a key pillar of growth in its most recent five-year plan. This mandate, coupled with China’s large existing factory robot industry, has spurred the creation of over 150 humanoid robot startups in the country (Bloomberg). These startups accounted for the vast majority of the roughly 13,000 humanoid robots shipped globally in 2025 (Bloomberg).  Manufacturing capacity for key components such as semiconductors may pose a limitation to some of China’s advancement in this realm, but with (1) cheaper models (Chinese companies AgiBot and Unitree offer entry level models for $5-15,000 versus a comment from Elon Musk that Optimus humanoid robots may cost $20-30,000), and (2) significant attention from the government, China’s humanoid robot sector may follow its EV sector in becoming a high-volume, affordable option for buyers globally (Reuters).

Drones: China dominates global commercial drone supply, though security concerns create a moat for US military drone manufacturers. Chinese firms, led by DJI, control 80% of the global commercial/consumer drone market (Atlantic Council). However, concerns over data sensitivity has spurred some government restrictions on drone imports to the US. The National Defense Authorization Act now effectively prohibits the purchase of drones made in China for virtually all federal funded projects. The FCC has also restricted all new foreign-made drones and certain RF components from getting equipment authorization, which means new models cannot receive licenses for legal imports (University of California). The large/liquid private companies we focus on are defense-oriented (i.e. Anduril, Shield AI, Skydio, Mach Industries, Firestorm) rather than commercial-oriented (agriculture, infrastructure inspection, surveying) and we therefore believe security concerns create a market moat for them.  At the same time, China’s extensive dominance on the commercial drone side creates a deep industry upon which its military may draw to advance military drone technology, especially for mass drone swarms. This may create even more opportunity for North American defense startups focused on anti-drone technology (i.e. Chaos Industries).

Space: US still dominates, but China is working to build its own space communications and defense capabilities. Owing primarily to SpaceX’s launch cadence, the US still conducts far more launches than China – 181 in 2025 versus China’s 92, Russia and New Zealand were next in line with 17 each (Payload Space). Chinese rockets are also not yet reusable, though they are aiming to close that gap by 2030 (CSIS). China has developed a domestic satellite manufacturing industry and is planning to launch several constellations, but it is well behind Starlink: The Guowong constellation, for example, is aiming for 13,000 satellites, but by November 2025 Guowong had less than 150 satellites in orbit versus over 8,000 for Starlink (CSIS). From the defense angle, the US Space Force reported last year that five Chinese satellites conducted coordinated close proximity maneuvers in 2024 that were described as “dogfighting in space” (Breaking Defense). Many private US and European companies are working on maneuverability capabilities in space, and this area is likely to become more competitive going forward.

Raw materials inputs: Cheap access is an advantage for China. While China lacks access to high-tech inputs such as advanced lithography equipment and GPUs, its raw

materials position in the sectors we’re analyzing is advantageous. It is well-known that China dominates the refining/production of critical minerals, from copper to magnesium to graphite (Mining Technology). Another key input advantage as it relates to AI is power costs. China’s power capacity has more than doubled since 2010 while US capacity has remained basically flat (Bloomberg, VanEck).  China has installed more generating capacity as well as high-voltage transmission lines.   This, combined with weaker industrial demand, has meant that Chinese power prices have recently be one-third to half as much as US prices (EIA, China Briefing). This gives China a competitive advantage in compute costs for AI, which could be meaningful going forward.

BIGGEST MOVERS AND TOPICAL NAMES

Based on our proprietary Tape D® data, the best performers of the large cap names in the private market thus far in 2026 have been:

• Cerebras Systems, with a +82% estimated share price performance
• OpenEvidence, +15%
• Eleven Labs, +12%
• Clickhouse, +10%