Gf Securities has released a research report indicating that the expansion of hard-tech project supply, driven by artificial intelligence, combined with the entry of long-term capital and improved diverse exit channels, is leading the private equity sector into a phase of structural recovery. With simultaneous improvements in assets, capital, and exit pathways, the industry is poised for a three-to-five-year recovery period for fundraising and exits. As legacy technology projects gradually enter their exit windows, alternative subsidiary direct investment operations are expected to shift from a capital deployment phase to a value realization phase. The report recommends focusing on leading brokers with comprehensive primary market capabilities, as well as mid-to-small sized brokers with prominent direct investment operations and higher profit elasticity.

AI-driven supply expansion and structural repair in private equity

The rapid acceleration of AI development, coupled with the divergence between China and the U.S., provides long-term growth prospects for technology investment in China. According to the 2026 AI Index Report, U.S. private AI investment in 2025 was approximately 23 times that of China. While the U.S. continues to expand capital expenditure through large models and massive computing power, China, facing constraints on capital and advanced computing resources, is placing greater emphasis on strengthening foundational technologies, optimizing computing efficiency, and facilitating industrial application scenarios. This is driving deeper integration of AI into manufacturing, energy, healthcare, and other sectors. According to Zero2IPO Research, AI-driven expansion in hard-tech project supply saw China's combined investment value in IT, semiconductors, electronic equipment, biotechnology, and healthcare exceed 50% of total investments in 2025. Under a scenario where assets, capital, and exits all improve simultaneously, the industry is expected to enter a three-to-five-year repair cycle for fundraising and exits.

Capital is concentrating toward state-owned and long-term investors, and broker-affiliated private equity firms capable of managing the full cycle of fundraising, investing, managing, and exiting are likely to benefit more. These brokerage private equity arms leverage their parent group's credit to attract government and industrial capital, while utilizing comprehensive investment banking resources to enhance project sourcing, pricing, and exit capabilities. According to CVInfo statistics, as of June 30, 2026, CICC Capital and CITIC金石 managed assets exceeding RMB 623 billion and RMB 235 billion respectively, establishing a first-mover advantage for leading institutions. As funds become fully paid-in and AUM grows, management fees are expected to improve; concurrently, as project exits increase, carry income is positioned for further realization.

Transition from capital deployment to value realization in direct investment

The ongoing expansion of artificial intelligence, semiconductors, and advanced manufacturing continues to supply investable projects. Commercialization progress and follow-on financing support the value growth of existing projects, while improved exit conditions convert book value into realized gains and cash returns. Early-stage investments are now entering their realization windows, potentially forming a virtuous cycle: expansion of tech asset supply, enterprise growth and valuation enhancement, exits via IPOs, M&A, or equity transfers, and capital recycling for reinvestment. In an environment of rising tech asset valuations and improved exit channels, alternative subsidiaries with substantial project pipelines, strong capital positions, and leading capabilities in pricing and exits are best positioned to unlock profit elasticity first.

IPO supply and secondary market valuations shape returns from sponsor co-investments

Under the full co-investment mechanism on the STAR Market and the specific-scenario co-investment requirements on the ChiNext Board, co-investment opportunities for alternative subsidiaries are directly tied to the number of IPO projects and their fundraising scale. Expansion in IPO listings increases the count of co-investment projects and principal amounts, while improved risk appetite for tech assets enhances the valuation of holdings during the lock-up period—together amplifying book gains. According to iFinD data, from 2021 to June 2026, major brokers' alternative subsidiaries saw 314 co-investment projects complete their lock-up expiries, with a cumulative market value of approximately RMB 29.23 billion, forming a sizable existing holding base. As reforms on the STAR and ChiNext boards deepen, the supply of tech company listings improves, and existing projects gradually unlock, brokers with abundant sponsorship pipelines and strong tech investment banking capabilities are positioned to benefit from both new co-investment scale expansion and the value release of existing holdings. Co-investment operations are poised to become a significant source of profit growth for alternative subsidiaries.

Key investment recommendations

First, focus on leading brokers with comprehensive primary-market capabilities: CITIC Securities (A+H), Guotai Junan International (A+H), and CICC (H), which combine private equity management foundations, tech investment banking pipelines, alternative investment capital strength, and diversified exit capabilities. Second, watch mid-to-small sized brokers with prominent direct investment operations and higher profit elasticity: Caitong Securities and Changjiang Securities.

Risk disclosures: Tech industry development and project commercialization may fall short of expectations; government fund contributions and private equity fundraising may underperform; recovery of IPO, M&A, and other exit channels may be slower than anticipated; tech asset valuations could experience significant fluctuations; project impairments and actual disposal returns may be lower than expected; and industry regulatory policies may change.