Tech investors face ‘new era’ of China restrictions after Biden order limits funding in A.I., chips
US President Joe Biden speaks on how “Bidenomics” is helping clean energy and manufacturing, at Arcosa Wind Towers in Belen, New Mexico, on August 9, 2023.
Jim Watson | AFP | Getty Images
The Biden administration’s executive order restricting U.S. private equity and venture capital investments in Chinese technology finally landed on Wednesday. For U.S. tech investors who’d already grown wary of the budding cross-Pacific rivalry, the ruling is the clearest signal yet that the world’s second-biggest economy is off limits.
Biden is specifically targeting investments in technologies like semiconductors, quantum computing and artificial intelligence on concern that China’s advancements in those areas run counter to U.S. national security interests. The new measure is expected to go into effect next year.
U.S. investors have been steadily retreating from China due to a combination of a weakening economy and the fraught geopolitical environment. Combined U.S. private equity and venture investments in China fell to an eight-year low in 2022 in terms of capital deployed, a trend that continued into the first half of this year, according to PitchBook data.
“We’ve had conversations with with our own clients who have said, ‘Yeah, look, we’ve really been pulling back on on our presence in China for a little while,'” said Elena McGovern, co-head of the national security practice at private equity advisory firm Capstone, in an interview. “This is the first time that the U.S. government is imposing restrictions on how U.S. capital flows out of the country, how U.S. investors are making investment decisions. So that is a new era.”
Political pressure has been bipartisan. Last month, the House Select Committee on the Chinese Communist Party sent letters to four U.S. venture firms, expressing “serious concern” about their investments in Chinese tech startups. And in July, legendary VC firm Sequoia Capital said it would split its international business into three parts, with Neil Shen helming its powerful Sequoia China unit.
At this point, any technology that can be used to enhanced China’s military strength or surveillance capabilities is of notable concern to the White House.
“U.S. money should not be used to finance Beijing’s military development,” said Eric Reiner, managing partner at Vine Ventures, which backs early-stage companies in the U.S., Israel and Latin America. “A lot of these firms that have been investing in China and setting up offices there are really playing with fire.”
While AI, computer processors, and quantum computing are areas of stated concern, many investors and experts say they have to move forward with the expectation that the ban will widen, essentially making any deal in Chinese technology too risky to pursue.
“It’s likely to deter investments in those sectors, even beyond what is explicitly prohibited,” said, Adam Hickey, a former deputy assistant attorney general for the Justice Department’s national security division who’s now a partner at law firm Mayer Brown. “Most investors want to avoid being seen as acting against U.S. national security interests.”
Steve Sarracino, the founder of Activant Capital, said “I don’t know anyone that’s doing early-stage China investing from from the U.S.” The only exception, he said, were “hedge funds, who really are in the business of calculating geopolitical risks.” Activant has offices in the U.S., Germany and South Africa.
The U.S. government’s ongoing hostility towards China carries its own risks. For one, there’s a ton of investment money in and around China that can fill the vacuum and potentially generate huge returns. There’s also the challenge of dealing with existing investments.
For example, major U.S. venture firms have invested in ByteDance, the parent of mobile video app TikTok, which has faced the threat of a potential ban in the U.S. or a forced sale to keep operating. Investors want to maximize their returns, which could be huge should ByteDance go public.
TikTok CEO Shou Zi Chew testifies before the House Energy and Commerce Committee hearing on “TikTok: How Congress Can Safeguard American Data Privacy and Protect Children from Online Harms,” on Capitol Hill, March 23, 2023, in Washington, DC.
Olivier Douliery | Afp | Getty Images
ByteDance reportedly scrapped a planned U.S. listing in 2021 after the company learned it needed to deal with potential security concerns. That same year, China cracked down on domestic companies that traded on U.S. exchanges. With the tech IPO markets still largely closed and U.S.-China tension only building, it’s not clear when or how ByteDance investors will realize their gains.
Other investors worry that if relations eventually improve between the two countries, U.S. firms will be at a disadvantage when it comes to finding and getting into deals. Rebuilding trust will likely be a particular challenge.
“If you already had a presence there, you will have an advantage when things open up,” Sarracino said. But that’s not the case for firms that weren’t in China or those that pared back their operations in the country, he said.
Reiner says the investment returns that could be generated from Chinese companies aren’t worth the global threat posed by having China own and control sensitive technologies.
“I wonder if the executive order itself is even really necessary,” he said, “or if we really should be spending our time securing our resources and incentivizing China not to spy on our important and proprietary technology.”
WATCH: Biden doesn’t want U.S. dollars funding China’s military
Instagram has installed a new privacy setting which will default all new and existing underage accounts to an automatic private mode.
Brandon Bell | Getty Images
Instagram now has 3 billion monthly active users, Meta CEO Mark Zuckerberg said on his Instagram account on Wednesday.
“What an incredible community we’ve built here,” Zuckerberg posted on his Instagram channel.
The figure is a major milestone for the photo-sharing app, which the social media company acquired in 2012 for $1 billion.
Meta last disclosed Instagram’s user figures in October 2022 when Zuckerberg said during an earnings call that the app had crossed 2 billion monthly users.
Meta said in April 2024 that it would no longer disclose the monthly and daily active user numbers for Facebook and its sibling apps on a quarterly basis. Since then, Meta has been reporting each quarter the number of daily active people using its family apps. That figure reached 3.48 billion, the company said in July, topping analysts’ estimates of 3.45 billion.
With 3 billion monthly users, Instagram joins the ranks of the Facebook and WhatsApp platforms.
Zuckerberg in January said that the Facebook app “is used by more than 3 billion monthly actives.” In April, Zuckerberg told analysts that WhatsApp had “more than 3 billion monthly actives.”
President Donald Trump takes a question from a reporter before signing executive orders in the Oval Office at the White House on September 19, 2025 in Washington, DC.
Andrew Harnik | Getty Images
It’s been a chaotic few days for the tech sector, and industry executives and experts are still assessing how U.S. President Donald Trump’s latest immigration crackdown could shape the future of their workforces.
The Trump administration sparked widespread panic Friday after announcing employers will pay a new $100,000 fee for H-1B visas, which are temporary work visas granted to highly skilled foreign professionals. These visas have underpinned the U.S. tech workforce for decades.
Some tech executives, including Netflix co-founder Reed Hastings and OpenAI CEO Sam Altman, have lauded the changes to the H-1B program, but experts told CNBC that the Trump administration’s changes could prevent some tech companies — namely startups — from securing top foreign talent. These experts said the changes also run the risk of driving top talent toward other countries.
“The short of it is, it would be a disaster for America, for American companies, American competitiveness, American innovation,” said Exequiel Hernandez, an associate professor at the Wharton School of the University of Pennsylvania.
Tech’s reliance on the H-1B program
The current annual cap for H-1B visas is at 65,000, along with 20,000 additional visas for foreign professionals with advanced degrees.
In fiscal 2025, Amazon, Microsoft, Meta, Apple and Google are among the top 10 companies that employ the most H-1B holders. Prominent tech executives like Microsoft CEO Satya Nadella, Google CEO Sundar Pichai and Tesla CEO Elon Musk were H-1B recipients earlier in their careers.
As tech companies scrambled to respond before Trump’s proclamation went into effect at 12:01 a.m. ET on Sunday, the White House quelled some concerns on Saturday by clarifying that the fee is not annual and would only apply to new visas, not renewals for current visa holders.
More changes could be on the horizon.
The Trump administration teased a proposed rule on Tuesday that said H-1B recipients should be selected through a weighted process instead of a random one. The weighted process would take place when the number of requests for visas exceeds the limit of available spots, and it would be based on wage levels, the proposal said.
The proposed rule will officially publish in the Federal Register on Wednesday, and it’s still subject to change after the administration reviews initial public feedback.
Hastings called the Trump administration’s $100,000 fee a “great solution,” in a post on X on Sunday.
“It will mean H1-B is used just for very high value jobs, which will mean no lottery needed, and more certainty for those jobs,” he wrote.
OpenAI’s Altman expressed support for the updates during an interview with CNBC’s Jon Fortt on Monday.
“We need to get the smartest people in the country, and streamlining that process and also sort of outlining financial incentives seems good to me,” Altman said.
‘It kneecaps startups’
Historically, H-1B visas have cost employers somewhere between $2,000 to $5,000 per application, depending on the size of the company, according to the Immigration Law Group.
The new $100,000 fee is a big jump for small, cash-strapped startups.
“You’re not going to find many startups who are going to be willing to pay $100,000 per H-1B, in addition to salary for that H-1B,” said Adam Kovacevich, CEO of Chamber of Progress, a left-leaning tech industry trade association.
Even big tech companies could feel some pain and have to reassess who they use H-1Bs for. But their deep pockets come with advantages.
“A big firm like Microsoft or Google, even though it’s not ideal for them, they have workarounds,” said Wharton’s Hernandez. “They can offshore jobs, or they’re the ones who can make acquisitions.”
Garry Tan, the CEO of the popular startup accelerator Y Combinator, criticized the Trump administration’s new fee, writing in a LinkedIn post that “it kneecaps startups” and is a “massive gift” to overseas tech hubs.
“In the middle of an AI arms race, we’re telling builders to build elsewhere,” Tan wrote. “We need American Little Tech to win—not $100K toll booths.”
A picture shows logos of the Big Tech companies named GAFAM, for Google, Apple, Facebook, Amazon and Microsoft, on June 2, 2023.
Sebastien Bozon | AFP | Getty Images
China and other competitors loom large
U.S. tech companies big and small are fiercely competing with one another – and the rest of the world – as they race to develop the most advanced AI models and applications. Organizations like Meta have shelled out billions of dollars to recruit top AI talent in an effort to try and gain an edge.
The Trump administration’s changes to the H-1B program could complicate similar recruiting efforts.
“What this does is that it gives our competitors, other countries, places like Asia, Canada, Europe, they can then attract these employees to create new innovations,” said Steven Hubbard, a data scientist at the American Immigration Council, which is a nonprofit for immigration advocacy and research.
One big competitor in the war for talent is China. The world’s second-largest economy has long fought against the U.S. for tech dominance, and more recently the AI race.
Earlier this year, Chinese AI firm DeepSeek rattled global markets after claiming to create a large language chatbot that outperformed competitors at a fraction of the cost. The news raised questions over the significant sums that American tech companies are shelling out on AI.
Some experts worry that visa changes could deal a victory into China’s hands, sending top talent overseas. The move may also deter foreign students from attending university in the U.S. as uncertainty hangs over their post-graduation job prospects.
“Those students are going to look at this environment and stay home,” said Greg Morrisett, vice provost at Cornell Tech. “It’s giving a leg up to both China and India in terms of feeding their startup ecosystems.”
For Bradley Tusk, the CEO of Tusk Venture Partners, the changes to the H-1B program are simply “terrible.” American companies have to have access to top talent in order to compete at the highest levels, he said.
“America’s competitive advantage has always been the ability to attract the best talent from around the world,” Tusk said. “To limit our ability to recruit and compete is illogical.”
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