People find out about Baidu’s artificial intelligence chatbot service Ernie Bot throughout the 2nd Global Digital Trade Expo at Hangzhou International Expo Center on November 23, 2023 in Hangzhou, Zhejiang Province of China.
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Nvidia’s rocket-ship ride within the stock market underscores the extent to which chip quality and availability will dictate the winners within the generative AI era. But there’s one other aspect to measuring early leads within the space. In China, which is angling to supply its own chips or get more from Nvidia, no dominant gen AI contender to OpenAI has emerged yet amongst dozens of Chinese tech titans and startups.
Late to the sport, China is in search of to catch the lead of OpenAI in a wider U.S. AI market shaped by tech titans Microsoft, Alphabet’s Google and Amazon, and well-financed startups including Anthropic, which this week received a $2.7 billion infusion of money from Amazon.
In the fast-moving field, the gap between the U.S. and its tech rival China is seen as wide. “The leading Chinese corporations are benchmarking against ChatGPT, which indicates how far behind they’re,” said Paul Triolo, senior vice chairman for China and technology policy lead at Dentons Global Advisors in Washington, D.C.
“Not too many corporations can support their very own large language model. It takes lots of capital. Silicon Valley is unquestionably well ahead of the sport,” said Jenny Xiao, a partner at AI VC firm Leonis Capital in San Francisco.
The U.S. stays the most important investment market. Last 12 months, funding of gen AI upstarts accounted for nearly half of $42.5 billion invested globally in artificial intelligence corporations, in line with CB Insights. In the U.S., VCs and company investors drove AI investment to $31 billion across 1,151 deals, led by large outlays in OpenAI, Anthropic and Inflection. This compares with $2 billion in 68 deals in China, which marked a big drop from 2022’s $5.5 billion in 377 deals. The fall-off is partly attributable to restrictions on of U.S. enterprise investment into China.
“China is at a giant drawback in constructing the muse models for Gen AI,” said Rui Ma, an AI investor and co-founder of investment syndicate and podcast TechBuzz China.
But where China lags in foundational models, that are dominated by OpenAI and Google’s Gemini, it’s closing the gap through the use of Meta’s open source, large language model Llama 1, and Triolo said the Chinese contenders, if behind, are improving on the U.S. model.
“Many of the China models are effectively forks of Llama, and the consensus is that these forks are one to 2 years behind the leading U.S corporations OpenAI and its video-to-text model Sora,” Ma said.
China does have the tech talent to make a difference within the AI rivalry within the years ahead.
A latest study by think tank Marco Polo, run by the Paulson Institute, shows that the U.S. is home to 60% of top AI institutions, and the U.S. stays by far the leading destination for elite AI talent at 57% of the whole, compared with China at 12%. But the research finds that China leads the U.S. by just a few other measures, including being ahead of the U.S. in producing top-tier AI researchers, based on undergraduate degrees, with China at 47% and the U.S. lagging with 18%. Additionally, amongst top-tier AI researchers working at U.S. institutions, 38% have China as their country of origin, compared with 37% from the U.S.
New Chinese gen AI market entries may reach mass adoption quickly. Baidu’s ChatGPT competitor, Ernie Bot, released in August 2023, reached 100 million users by the top of the 12 months. Samsung is planning to integrate Baidu’s Ernie AI into its latest Galaxy S smartphones while in one other high-profile development that speaks to U.S.-China relations, Apple is in talks with Baidu about supplying the iPhone 16 with the Chinese company’s gen AI technology.
Within its current slate of AI contenders, Baidu’s Ernie Bot models are considered amongst essentially the most advanced, in line with Leong.
Several other Chinese corporations are forging ahead, funded by major players in its own technology market. Large cloud corporations akin to akin to Baidu and Alibaba, social media players ByteDance and Tencent, and tech corporations SenseTime, iFlyTek, Megvii and Horizon Robotics, in addition to research institutes, are all aiding the hassle.
Moonshot AI, funded by China’s e-commerce giant Alibaba and VC firm Hongshan (previously Sequoia China), is constructing large language models that may handle long content inputs. Meanwhile, former Google China president Kai-Fu Lee has developed an open source gen AI model, 01.AI, funded by Alibaba and his firm Sinovation Ventures.
While China has accelerated development of its homegrown chip industry and advanced AI, its AI development has been limited partly by U.S. restrictions on exporting high-end AI chips, a market cornered by Nvidia, as a part of a latest battleground for tech supremacy between the U.S. and China.
“Despite efforts to develop indigenous solutions, Chinese AI developers still largely depend on foreign hardware, particularly from U.S. corporations, which is a vulnerability in the present geopolitical climate,” said Bernard Leong, founder and CEO of tech advisory Analyse Asia in Singapore.
The ongoing tensions between the U.S. and China over technology innovation and national security issues is resulting in a split in gen AI development, following the pattern of other impactful technologies caught up in superpower tech arms races. Given regulations and bans over sensitive, cutting-edge technologies, the likely final result is 2 parallel ecosystems for gen AI, one within the U.S. and one in China. ChatGPT is blocked in China while Baidu’s Ernie Bot can only be accessed within the U.S. with a mainland Chinese cellular phone number. “U.S. corporations cannot go into China and Chinese corporations cannot go into the U.S.,” Xiao said.
U.S. Secretary of Commerce Gina Raimondo has stated that a goal of U.S. curbs on AI chip exports is to forestall China from acquiring or producing advanced chips. As mainland China focuses on homegrown capabilities, Chinese corporations SMIC or Huawei might be a substitute for Nvidia. But the longer term for alternates is probably going uncertain if export controls cut off these corporations from essentially the most advanced designs for manufacturing. Triolo noted that Huawei recently developed a series of AI chips as a rival to Nvidia.
China is getting ahead in applying AI to certain categories, akin to computer vision. “The chip shortage may be very essential for training foundational models where you would like certain chips, but for applications, you do not need that,” Ma said.
The “real killer app” for gen AI, in line with Triolo, shall be in corporations which might be willing to pay money to harness the technology as a part of their business operations. Alibaba is specializing in integrating AI into its e-commerce ecosystem. Huawei, while competing more successfully against Apple’s iPhone in the patron market up to now 12 months, also has broader ambitions, developing AI for specific industries including mining, using its in-house hardware, Leong said.
Boston Consulting Group research suggests it might be some time before this wider gen AI market ramps outside of tech. Sixty percent of 1,400 executives surveyed are waiting to see how gen AI regulations develop, while only 6 percent of corporations have trained their employees on gen AI tools.
AI and tech issues are front and center for China’s leadership, with the country’s release of guardrails on AI in 2023 after ChatGPT’s breakthrough, after which modifications of some measures.
The open source gen AI technology many Chinese developers use can encourage collaboration amongst globally and result in shared insights as AI advances, but Leong said open source also results in issues related to making sure quality and security of the models, in addition to managing bias and potential misuse of AI.
“China desires to ensure content isn’t spewing out. They also want their corporations to guide and are willing to reign in draconian measures,” Triolo said.
Ethical and social concerns hinder gen AI advances in China in addition to other regions, including the U.S., as see within the battle for control over OpenAI’s mission. Within China, there’s one other factor that might slow AI acceleration, in line with Leong: maintaining control of gen AI applications, especially in areas sensitive to state interests.
