China lures billionaires in race to catch US in AI

China lures billionaires in race to catch US in AI

China is a landscape held back by US tech sanctions, data from regulators and calls for censorship

China’s tech sector has a new obsession: competing with US titans like Google and Microsoft Corp. in the breakneck race of global artificial intelligence.

Billionaire entrepreneurs, mid-level engineers and foreign firm veterans alike now nurture a remarkably consistent ambition: to surpass geopolitical rival China in a technology that could determine the stakes of global power. Among them is Internet mogul Wang Xiaochuan, who entered the fray after OpenAI’s ChatGPT debuted in a social media storm in November. He joins the ranks of Chinese scientists, programmers and financiers – including former employees of ByteDance Ltd., e-commerce platform JD.com Inc. and Google – who are expected to push about $15 billion in technology spending this year TO THE.

For Wang, who founded the Sogou search engine that Tencent Holdings Ltd. bought in a $3.5 billion deal less than two years ago, opportunity came fast. By April, the computer science grad had already launched his own startup and secured $50 million in seed capital. He contacted Sogou’s former subordinates, many of whom he convinced to come on board. In June, his company launched a large open-source language model and is already being used by researchers at China’s top two universities.

“We’ve all heard the sound of the starting gun in the race. Tech companies, big or small, are all in the same starting line,” Wang, who called his startup Baichuan or “A Hundred Rivers,” told Bloomberg News . “China is still three years behind the United States, but we may not need three years to catch up.”

The high-level Chinese talent and funding flowing into AI mirrors a surge in activity rocking Silicon Valley, which has profound implications for Beijing’s escalating conflict with Washington. Analysts and executives believe that artificial intelligence will shape the tech leaders of the future, just as the internet and the smartphone created a corps of global titans. Furthermore, it could push applications from supercomputing to military prowess, potentially shifting the geopolitical balance.

China is a very different landscape, held back by US tech sanctions, regulator data and censorship demands, and Western distrust that limits the international expansion of its domestic champions. All of this will make it more difficult to catch up with the US.

US AI investment dwarfs China’s, totaling $26.6 billion in the year through mid-June compared to $4 billion in China, according to previously unreported data compiled by the consultancy. Preqin.

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Yet that gap is already gradually narrowing, at least in terms of deal flow. The number of Chinese venture capital deals in the AI ​​sector comprised more than two-thirds of the US total of about 447 in the year to mid-June, up from about 50% in the previous two years. China-based venture capital deals also outpaced consumer tech in 2022 and early 2023, according to Preqin.

All of this is not lost on Beijing. Xi Jinping’s administration realizes that artificial intelligence, much like semiconductors, will be critical to maintaining China’s ascendancy and is likely to mobilize the nation’s resources to drive progress. While investment in startups has plummeted in the years of Beijing chasing tech giants and “reckless capital expansion,” the sense is that the Party is encouraging the exploration of AI.

It’s a familiar challenge for Chinese tech gamers.

During the mobile age, a generation of startups led by Tencent, Alibaba Group Holding Ltd. and TikTok owner ByteDance created an industry that could truly rival Silicon Valley. It has helped Facebook, YouTube and WhatsApp get shut out of the booming market of 1.4 billion people. At one point in 2018, venture capital funding in China was even on track to surpass that of the United States, until the trade war exacerbated an economic downturn. That situation, where local businesses thrive when US rivals are absent, is likely to play out once again in an AI arena from which ChatGPT and Google’s Bard are effectively excluded.

Big AI models could eventually behave much like the Android and iOS smartphone operating systems, which provided the infrastructure or platforms on which Tencent, ByteDance and Ant Group Co. broke new ground: in social media with WeChat, videos with Douyin and Tiktok, and payments with AliPay. The idea is that generative AI services could accelerate the emergence of new platforms to host a wave of game-changing apps for businesses and consumers.

This is a potential bonanza for an industry just emerging from the trauma of Xi’s two-year internet crackdown, which robbed tech companies of the heady growth of years past. No one today wants to miss out on what Nvidia Corp. CEO Jensen Huang called the “iPhone moment” of their generation.

“This is an ongoing AI arms race in both the United States and China,” said Daniel Ives, senior analyst at Wedbush Securities. “Chinese tech is dealing with a tougher regulatory environment on AI, which puts its hand behind its back in this ‘Game of Thrones’ battle. This is an $800 billion market opportunity globally in the next decade that we estimate around AI, and we are only in the very early stages”.

The determination to capture OpenAI is evident in the seemingly random way incumbents from Baidu Inc. and SenseTime Group Inc. to Alibaba have pulled off AI bots over the course of months.

Joining them are some of the biggest names in the industry. Their ranks include Wang Changhu, the former director of ByteDance’s AI lab; Zhou Bowen, former president of AI and cloud computing at JD.com Inc.; Meituan co-founder Wang Huiwen and current boss Wang Xing; and venture capitalist Kai-fu Lee, who made his name backing Baidu.

Former Baidu chairman Zhang Yaqin, now dean of Tsinghua University’s Artificial Intelligence Industry Research Institute and overseer of a number of budding projects, told Chinese media in March that investors were almost looking for him. every day that month. He estimates that there are at least 50 companies working on large language models across the country. Wang Changhu, a former lead researcher at Microsoft Research before joining Bytedance in 2017, said dozens of investors approached him on WeChat in a single day when he was preparing to build his generative AI startup .

“This is at least a once-in-a-decade opportunity, an opportunity for startups to create companies comparable to behemoths,” Wang told Bloomberg News.

Many of the fledgling companies are targeting the home crowd directly, given the growing concern in the West about Chinese technology. Even so, there is an open field in a self-enclosed consumer market, which is also the largest Internet arena in the world. There are applications in the works powered by artificial intelligence, from a chatbot to help manufacturers track consumption trends, to an intelligent operating system that offers companionship to counter depression and intelligent business tools to transcribe and analyze meetings.

However, the Chinese demos thus far make it clear that most still have a long way to go. Skeptics point out that true innovation requires freewheeling exploration and experimentation that the US nurtures but is limited in China. Pervasive censorship in turn means that the data sets used by would-be Chinese are inherently flawed and artificially limited, they argue.

“Investors are chasing the concept,” said Grant Pan, chief financial officer of Noah Holdings, whose Gopher subsidiary invests in more than 100 funds including Sequoia China (now HongShan) and ZhenFund in China. “However, commercial use and impact on industrial chains are still unclear.”

Then there are Beijing’s regulations on generative artificial intelligence, with its top internet supervisor signaling that the burden of training algorithms and implementing censorship will fall on platform providers.

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“Beijing’s censorship regime will put Chinese ChatGPT-like applications at a serious disadvantage compared to their US peers,” said Xiaomeng Lu, director of geotech practice at Eurasia Group.

Last but not least, powerful chipsets from Nvidia and Advanced Micro Devices Inc. are critical for training large AI models, but Washington is ruling out those in the country.

But those hurdles haven’t stopped the big-timers in China, from Baidu and iFlytek Co. to the slew of new startups, from betting on matching and surpassing the United States on artificial intelligence.

Executives, including from Tencent, say models can add more chipsets to compensate for the lower performance. Baichuan’s Wang says it gets away with Nvidia’s A800 chips and will get more capable H800s in June.

Others like Lan Zhenzhong, a veteran of Google’s AI Research Institute who founded Hangzhou-based Westlake Xinchen in 2021, employ an expensive hybrid approach. The Baidu Ventures-backed company uses fewer than 1,000 GPUs for model training, then deploys home cloud services for inference or to support the program. Lan said that renting an A100 chip from cloud services costs 7 to 8 yuan per hour: “Very expensive.”

Billionaire Baidu founder Robin Li, who unveiled China’s first response to ChatGPT in March, said the US and China both account for about a third of the world’s computing power. But that alone won’t make a difference because “innovation is not something you can buy”.

“Why aren’t people willing to invest long-term and dream big?” asked Wayne Shiong, partner at China Growth Capital. “Now that we have been entrusted with this task from the other side, China will be able to catch up.”

–With assistance from Zheping Huang and Vlad Savov.

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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