The Rise of Chinese AI Unicorns and a Battle with OpenAI
[TL; DR]
China’s Zhapu Ai, Moonshot AI, 01.AI and MiniMax are some of the leading AI startups in the country.
Baidu, Alibaba and Tencent have been financially supporting AI startups in China.
The geopolitical tensions between China and the United States may negatively affect the growth of the Chinese AI sector.
Introduction
The artificial intelligence frenzy started when ChatGPT was launched in 2023. After that many other large firms like Meta ventured into the sector. However, in 2023 China seemed to lag behind other leading economies such as the United States in the adoption of AI technologies. The current trend, though, indicates that China is presently very active in terms of AI unicorns. This article covers China’s progress in promoting AI technology.
The Emergence of Chinese AI Unicorns
Many Chinese AI start-ups are ramping their efforts to keep pace with AI developments in other countries, especially the United States. What makes their efforts significant is the fact that ChatGPT, the leading generative AI services provider, is currently not available in China. This means that there is high demand for AI services in that country.
Four leading Chinese Generative Artificial Intelligence unicorns have a valuation of over $1 billion each, showing significant progress in the sector. Globally, though, OpenAI - the San Francisco-based AI firm - remains the leader with a valuation of over $80 billion. The fact that its AI chatbot, ChatGPT, is not available in China shows the significance of the stiff competition among leading Chinese generative AI firms.
Despite China lagging behind the United States in terms of generative AI technology, it remains a strong hub for technological innovation, with over 369 unicorns. Notably, more than 25% of the Chinese unicorns operate in artificial intelligence (AI) and related sectors, such as the semiconductor production industry.
Compared to the other 15 sectors the AI industry in China has the highest number of unicorns showing the high effort the country is making in investing in the AI sector. According to the Global Unicorn Index, AI unicorns in China have an average valuation of US$6.57 billion. Also, out of the 369 unicorns the AI startups China account for 14.1% of the investment the Unicorns have made.
Overall, though, China still lags behind the United States. For example, in last year’s tally the United States had 700 unicorns while China had 340. This is in relation to the global tally of 1,453 unicorns.
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Local Investors Support Startups in China
The interesting thing is that Big Tech companies like Tencent Holdings, Alibaba and Baidu incubated most of the leading AI unicorns. Despite the fact that over 70% of the 369 Chinese unicorns received financial support from foreign investors, established local tech firms including HongShan, Citic Capital and Tencent supported many of these companies.
For example, Alibaba, the e-commerce giant, has backed three ventures in the AI space which include 01.AI and Baichuan. Tencent has also invested in several AI technology development firms like Zhipu, from Tsinghua University.
Leading the Pack: Zhipu AI and Moonshot AI
The leading Chinese startups that are venturing in generative artificial intelligence include Zhipu AI, MiniMax, Moonshot AI and 01.ai. Also, these are examples of venture capital Chinese unicorns that have received financial support from local Tech companies like Baidu. In all, these tech startups have raised more than Rmb14.3bn ($2bn) in the first quarter of 2024 to expand their operations.
Likewise, a total of 262 AI-focused start-ups are strong ChatGPT alternatives for the Chinese market. Their strong OpenAI competition may extend beyond the Chinese borders. Let’s take a brief look at the activities of a few tech firms that are focusing on artificial intelligence investment in China.
Zhapu AI: Based on the number of employees, Zhapu AI has become the largest AI startup China. With a valuation of over Rmb18bn ($2.5bn) Zhapu has more than 800 employees. As hinted earlier on, this AI firm is supported by leading tech companies which include Alibaba Cloud, Tencent, and Xiaomi. As a result, the Alibaba Tencent AI investment has helped Zhapu’s GLM model to become the fourth largest player a huge AI market share China.
Moonshot: Moonshot, with a valuation of over $2.5 billion, focuses on students and office workers who use digital assistants when carrying out their tasks. For example, they may want to summarize texts to make it easier to comprehend or to optimize search results. In March alone, Kimi, Moonshot’s AI chatbot, had more than 12 million visits.
The Gaming and Productivity Sectors: MiniMax and 01.ai
Some of the leading AI startups are MiniMax, a Shanghai-based firm and 01.ai which focuses on productivity. MiniMax is valued at $2.5 billion while 01.AI has a valuation of $1.2 billion.
MiniMax: MiniMax is in the gaming sector with its anime-themed AI characters, which engage users. The avatars interact with the users and generate various responses based on existing scenarios. MiniMax’s app, Glow, enables users to create virtual characters they can chat with.
01. AI: 01.AI uses open-source AI models tailored for the Chinese market. Built on Meta’s free-to-adapt Llama architecture, 01.AI’s Yi—a series of open-source models—performs well in coding, reasoning, reading ability, and Maths.
Read also: AI Predicts China Will Ban High-Energy Blockchains
The Broader Chinese AI Landscape
The generative AI as well as the blockchain and cryptocurrency China sectors heated up in 2023 following OpenAI and other US AI companies’ announcements of their AI models and future prospects. In response, leading Chinese tech giants that include Alibaba, Tencent and Baidu developed their LLMs.
Generally, there is a high AI adoption in different sectors of the Chinese economy including the high-tech, finance and retail sectors. For instance, there are many AI applications for the service industry that enable firms to engage with customers meaningfully, thereby promoting loyalty and generating much revenue.
In the very near future, Chinese unicorns may contribute significantly to the transportation, logistics, and automotive sectors. They may also help increase productivity in enterprise software and healthcare facility development. For example, AI will play a major role in self-driving vehicles and road accident prevention.
Challenges Chinese AI Unicorns May Face
Geopolitical tensions are likely to affect the performance of Chinese AI unicorns and the blockchain and cryptocurrency China sectors. For example, the greatest geopolitical tension AI technology would impact would be the shortage of essential components that usually come from developed countries like the United States.
For instance, recently the United States administration, led by President Joe Biden, banned the sale of Nvidia Corp’s advanced AI semiconductors to Chinese customers as it alleges that China may use them to train AI models for military applications. Thus, the shortage of essential components may put much pressure on the AI and semiconductor sectors China. Worse still, US based manufacturing firms may stop investing in sensitive technologies in China that are important for the growth of the AI sector.
Second, the geopolitical tension between China and the United States will hinder fundraising efforts of Chinese Tech startups. For example, the United States trade and investment restrictive measures may prohibit US based venture capitals to provide funding for Chinese AI unicorns which may affect their potential. As an example, the shortage of vital components may retard Moonshot AI growth and MiniMax gaming AI expansion.
Conclusion
China’s AI sector is developing at a fast rate as billions of dollars are being channeled to the industry on a yearly basis. For example, several leading AI unicorns in China have valuations of over $1 billion each. Zhipu AI, 01.AI, Moonshot AI and MiniMax are examples of major AI firms in China. The good thing is that big tech companies like Alibaba, Tencent, Baidu and Xiaomi have funded some of these AI startups China.
