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In 2023, a global frenzy around artificial intelligence swept the world, fueled by the advent of ChatGPT. In China, where OpenAI chatbots are not available, startups and established technology companies have rushed to develop their own AI models and applications, using the foundations of U.S. startups. Individual AI fans accessed his ChatGPT through his web of black market vendors, often keeping their accounts alive through unauthorized virtual private networks.
At first glance, generative AI is flourishing in China, but a closer look reveals otherwise.Despite the hype, the venture Capitalists are not as enthusiastic about this nascent technology as might be expected.
According to research firm CBInsight, China recorded about 232 investments in the AI field in 2023, a decrease of 38% from the previous year. The total amount raised by Chinese AI companies was about $2 billion, down 70% from the previous year.
Another report from a Chinese database shows a similar downward trend, but with further increases in funding. According to ITJuzi, China recorded 530 fundraising events in the AI field in the first 11 months of 2023, down 26% year-on-year. These investments amounted to a total of 63.1 billion yuan ($8.77 billion), down 38% year-on-year and significantly lower than the 2021 peak of 248.78 billion yuan.
The difference in investment size between the two reports may be due to differences in how funding rounds are aggregated. ITJuzi may have a better grasp of local funding activity than its international peers, especially as Chinese AI startups have become more cautious about raising US dollar funding. Many are now concerned about US regulatory scrutiny of the influx of US capital into AI businesses.
More broadly, the slowdown in China's AI funding is not entirely unexpected given the continued weakness in global VC investment. But Chinese AI startups face a unique set of obstacles. U.S. venture capital, which has historically been the main driver of growth in China's internet sector, has been in free fall since the beginning of the U.S.-China decoupling. l outlookAs Chinese tech companies' entry into the U.S. stock market has waned amid geopolitical tensions, investors have become more wary of backing hyped businesses without clear exit paths or monetization plans. Ta.
Additionally, the capital-intensive nature of AI startups, which require vast computing power and coupled with unproven business models, could discourage local RMB funds from taking risks.
While a few Chinese AI startups with venerable founders, such as Wang Xiaochuan's Baichuan and Kai-Fu Lee's 01.AI, can still raise large amounts of funding, the majority of small companies facing increasingly conservative investors. The task of developing China's equivalent of ChatGPT has fallen on deep-pocketed tech giants with stockpiles of AI chips, while resource-poor startups are building on open source and homegrown models. is exploring niche industrial applications.
Meanwhile, questions remain about the technical capabilities of China's large-scale language models, as developers face a prolonged AI chip shortage. As the US-China tech war intensifies, Washington has banned the export of Nvidia's high-end graphics processing equipment to China.
Internally, tighter regulations are increasing compliance costs for AI startups. Unlike larger, well-funded startups, many startups lack the financial and bureaucratic resources to obtain the necessary AI licenses or meet state internet censorship requirements. Therefore, some companies are turning their focus to global markets, which creates another set of challenges. While regulatory and political uncertainty may be less glaring hurdles, these startups must contend with new user behaviors and an internet ecosystem that is completely disconnected from their home market.
Adventurous AI companies may seek funding from overseas investors, perhaps US investors, to ultimately help with their go-to-market strategies.But before that can be done Dealing with US institutions requires appropriate corporate structures, offshore data storage solutions, and even foreign passports for founders so Silicon Valley investors don't worry about violating US regulations on China-related investments. Is required.
With limited funding available, 2024 may be a year of judgment for many AI startups in China.