After years of building humanoid robots capable of running, dancing and performing backflips, Chinese companies are pouring resources into a different challenge: developing the AI that could make those machines useful across a wider range of jobs. The shift is fuelling an investment boom in embodied AI, a field focused on software that allows robots to understand their surroundings, learn unfamiliar tasks and adapt without having to be programmed for every job.
Chinese embodied AI companies raised 93.5 billion yuan ($13 billion) across 322 deals in the first half of 2026, five times the amount a year earlier, according to data research firm ITjuzi. Funding is increasingly reaching specialist developers of robot intelligence alongside manufacturers.
As competition drives down hardware prices, robot makers have concluded that the margin won't come from the hardware but from the brain, said Dermot McGrath, founder of Shanghai-based technology consultancy ZenGen Labs. The emerging sector is opening a new front in US-China tech rivalry.
American companies lead in some advanced robot AI systems, while Chinese developers hope their manufacturing strength and access to real-world training data will help them challenge their US competitors. The country that best combines AI with machines could gain an advantage in automating factories and logistics, potentially reshaping industrial productivity and the global market for robotics technology.
The brain is indeed the weakest link in the complete robotics stack, said Spirit AI co-founder Gao Yang. American startups, including Physical Intelligence, Skild AI and Generalist, are developing software intended to teach robots different skills without extensive retraining.
Generalist says its GEN-1.5 model completed around 60% of simple tasks after viewing a demonstration lasting between 3 and 12 seconds. China's X Square has published research showing robots acquiring handling skills from a single human video without retraining the model for each task.
The leading American labs are setting a demanding benchmark, particularly in how quickly robots can acquire and reuse skills, said robotics consultant Georg Stieler, who considers China's strongest startups credible competitors. While US developers benefit from advanced AI research and greater access to powerful computing chips, Chinese companies can work closely with robot manufacturers and industrial customers to test and improve their systems.
Specialist Chinese startups, including X Square, Galaxea and Spirit AI, have each reached valuations of roughly $3 billion, according to company disclosures. We want robots to shift from being driven by code to being driven by common sense, said X Square co-founder and COO Yang Qian.
Established manufacturers are investing too. Hong Kong-listed UBTech advertised a chief scientist position overseeing AI model development with compensation of up to 124 million yuan ($18 million), including equity and benefits.
Hangzhou-based Unitree, one of the world's largest humanoid robot makers by shipments, has about 30 researchers developing AI that predicts how objects behave, according to a person briefed by the company. Unitree did not respond to a request for comment.
Unlike chatbots, which learn from vast quantities of internet text, robots need examples of physical interactions, from gripping objects to handling flexible wires. Chinese companies are actively working to bridge this data gap through innovative approaches.