Temasek is sharpening its artificial intelligence strategy in China by focusing on areas where AI can move beyond software and into the physical economy.
Nagi Hamiyeh, President of Temasek Global Investments, said the Singapore-based investment firm sees opportunities in China’s AI market, especially in physical AI and practical applications. His comments highlight how major global investors are looking beyond headline-grabbing AI models and paying closer attention to technologies that can be used in factories, logistics, robotics, healthcare, mobility and other real-world industries.
The remarks come at a time when artificial intelligence remains one of the most closely watched investment themes globally. China continues to play a major role in the development and deployment of AI, supported by its large technology ecosystem, manufacturing base and growing demand for automation.
Temasek AI Investments Target Practical Use Cases
Temasek AI Investments in China are not only focused on digital platforms or large language models. The firm is also looking at physical AI, a fast-growing area where artificial intelligence is connected to machines, sensors, robots and industrial systems.
Physical AI can help machines understand their environment, make decisions and carry out tasks with limited human input. This makes it especially important for sectors such as advanced manufacturing, smart logistics, autonomous systems and industrial automation.
For investors, this part of the AI market is attractive because it connects technology directly to productivity. Companies that can use AI to reduce costs, improve efficiency and solve real business problems may be better positioned for long-term growth.
Why China Remains Important for AI Growth
China remains one of the world’s most important AI markets because of its scale, engineering talent and strong demand for automation. The country has a large base of manufacturers, technology companies and application developers that can turn AI tools into commercial products.
This gives investors like Temasek a wide range of opportunities. Instead of only backing companies building foundational AI models, investment firms can also look at businesses applying AI in industries where demand is already visible.
These include robotics, electric vehicles, supply chains, smart cities, healthcare tools and enterprise software. In many of these areas, China has both the market size and the industrial ecosystem needed to support rapid adoption.
Geopolitics Remains a Key Risk
While the opportunity is significant, Temasek also sees major risks. Hamiyeh pointed to geopolitics and technology bifurcation as important concerns for investors watching China’s AI sector.
Technology bifurcation refers to the growing split between global technology systems, especially as countries place tighter controls on chips, data, AI models and strategic technologies. For companies operating across borders, this can create uncertainty around supply chains, market access and regulation.
This is especially important in AI, where access to advanced semiconductors, cloud infrastructure and research partnerships can shape the pace of innovation.
Investors Balance Growth and Risk
Temasek’s view reflects a broader shift in global investing. Artificial intelligence remains a powerful growth theme, but investors are becoming more selective. They are looking for companies with clear business models, strong use cases and resilience against geopolitical disruption.
In China, that means focusing on AI businesses that can serve domestic demand, support industrial upgrading and remain competitive even as global technology rules become more complex.
Physical AI fits that strategy because it is closely linked to real economic activity. As companies search for efficiency, automation and smarter operations, AI applications in the physical world could become one of the most important areas of technology investment.
Outlook for Temasek AI Investments
Temasek AI Investments in China show how global capital is adapting to the next phase of artificial intelligence. The focus is shifting from excitement around AI itself to the practical question of where AI can create lasting value.
For China, the opportunity lies in combining artificial intelligence with its industrial strength. For investors, the challenge is to identify companies that can grow despite geopolitical pressure and an increasingly divided technology landscape.
As AI moves deeper into the real economy, physical AI and application-focused companies may become central to the next wave of technology investment.
