Even as geopolitical frictions and market swings unsettle venture investors, Hong Kong-founded Hermitage Capital is sticking to a global strategy of backing frontier technology companies wherever they emerge.

With a US$1.5 billion war chest that is 80 per cent in US dollars, with the remainder in renminbi, the private equity firm is ramping up investments across artificial intelligence, semiconductors and robotics, mainly in the US and China, capitalising on a market turnaround triggered by the breakout success of names like DeepSeek since last year.

“Even when sentiment is at its lowest and valuations and confidence are under severe pressure, we need to keep adding to top-tier technology companies,” said Sean Xiang Yuqiu, the firm’s founder and CEO, in a recent interview with the South China Morning Post.

Since announcing a three-year plan last year to invest US$500 million in AI and robotics globally, Hermitage had already deployed more than US$200 million, Xiang said.

Founded in 2017 by the former JPMorgan Chase banker, the firm counts institutional investors and wealthy family offices across Asia among its backers, accounting for about 80 per cent of its capital, with others in the UK and Canada.

Xiang adheres to a straightforward, unyielding investment thesis through geopolitical turbulence, market swings and business downturns: “Global, long-term, only the best.”That conviction was forged during a steep market downturn. Amid Beijing’s regulatory tightening on internet platforms and property, alongside tightening US export controls, global sentiment towards mainland assets had plunged since 2022.

“Global interest in Chinese assets after 2022 didn’t decline gently – it fell off a cliff,” Xiang recalled.

This economy’s concentration of engineers, manufacturing capabilities and ability to turn pressure into technological improvements may be unmatchedSean Xiang, Hermitage Capital In response, Hermitage pivoted to a dual-track strategy. Its New York office, originally set up to raise US capital for Chinese deals, shifted to sourcing and evaluating American firms. Today, Hermitage’s portfolio of more than 30 companies is split roughly evenly between China and overseas markets, predominantly the US.

Yet, Xiang remains firmly convinced of China’s industrial resilience. US semiconductor restrictions, he said, forced domestic chipmakers to turn designs into commercial products faster and secure local customers.

“Once the geopolitical headwinds have been weathered, the world will gradually recognise a simpler truth: this economy’s concentration of engineers, manufacturing capabilities and ability to turn pressure into technological improvements may be unmatched,” Xiang said. Hong Kong serves as the essential bridge for this strategy.

Xiang described the city as an “operating system” for global investing, linking capital, tech companies and supply chains through an internationally recognised institutional and legal framework.

Its time zone helped Asian fundraising, while its capital markets offered a natural exit avenue as portfolio companies matured, he added.

Hermitage typically enters at series B through D rounds, taking a high-conviction approach by backing its top picks across multiple market cycles.

The company has taken part in 13 funding rounds for cross-border payments unicorn Airwallex since 2019, five rounds for autonomous-driving chipmaker Horizon Robotics and three for graphics processor developer MetaX Integrated Circuits.

Horizon Robotics listed in Hong Kong in October 2024, while MetaX debuted on Shanghai’s Nasdaq-style Star Market in December 2025.

Converting interest into action, Xiang said, required strong discipline. Moving from liking a company to investing required 10 times the resolve and effort, he said, adding that building a large position and holding it over the long term each required another tenfold increase.

Foundation models were the sector to bet heavily on in 2023 and 2024. Physical AI is the sector to bet heavily on nowSean Xiang, Hermitage Capital“Just liking it is meaningless,” he said. “You’re only a spectator.”Growing demand for transparency and control was reshaping how Hermitage interacted with its investors, Xiang said. Family offices increasingly preferred single-deal, special-purpose vehicles over traditional decade-long blind-pool funds, seeking more visibility on entry valuations and exit timelines, he said.

In terms of sector strategy, Hermitage has selectively locked in gains by trimming earlier bets on large language models to focus on the next frontier.

“Foundation models were the sector to bet heavily on in 2023 and 2024,” Xiang said. “Physical AI is the sector to bet heavily on now.”The firm’s pivot comes amid volatility in Chinese humanoid robotics equities, driven by sobering market expectations. Unitree Robotics, for instance, plunged nearly 60 per cent from its peak after its high-profile debut on Shanghai’s Star Market in August, as investors recalibrated sky-high growth assumptions.

Acknowledging that frontier technology start-ups were “born expensive”, commanding valuations well ahead of commercial orders and real-world data, Hermitage said it was selectively targeting robotics, self-improving AI and enabling hardware.

Recent deals include US humanoid robot maker 1X, AI research automation developer Recursive Superintelligence and Chinese robotics-chip developer D-Robotics. Lessons from earlier hardware cycles had refined the firm’s risk management, Xiang said.

Disappointments in solid-state battery investments from 2021 – where mass production lagged behind schedules – taught the firm to size initial tickets more conservatively, committing larger follow-on capital only as operational milestones were met, he said. Ultimately, Xiang said he measured portfolio bets using a “worry-to-return ratio”.

“You want to have the lowest worry per unit of return,” he said, adding that the goal was to own businesses that the firm could hold through downturns without constantly questioning their durability.