The US In the accompanying tech race, China lags on a key asset: its own OpenAI

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People learn about Baidu’s artificial intelligence chatbot service Ernie Bot during the 2nd Global Digital Trade Expo at the Hangzhou International Expo Center on November 23, 2023 in Hangzhou, Zhejiang province, China.

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of Nvidia The rocket-ship ride in the stock market underscores the extent to which chip quality and availability will determine the winners in the generative AI era. But there is another aspect to measuring initial leads in the space. In China, which is scrambling to produce its own chips or acquire more from Nvidia, no strong gen AI contender for OpenAI has yet emerged among dozens of Chinese tech titans and startups.

At the end of the game, China wants OpenAI’s lead in the huge US AI market shaped by tech titans. Microsoft, of the alphabet Google and AmazonAnd well-financed startups, including Anthropic, which received $2.7 billion in cash from Amazon this week.

In the fast-moving sector, the gap between the US and its tech rival China is seen as wide. “Major Chinese companies are benchmarking against ChatGPT, which shows how far behind they are,” said Paul Triolo, senior vice president and technology policy lead for China at Dentons Global Advisors in Washington, DC.

“A lot of companies can’t support their own big language model. It takes a lot of capital. Silicon Valley is definitely ahead of the game,” said Jenny Xiao, partner at AI VC firm Leonis Capital in San Francisco.

The US is the largest investment market. Last year, funding from generative AI upstarts accounted for nearly half of the $42.5 billion invested globally in artificial intelligence companies, according to CB Insights. In the US, VCs and corporate investors drove AI investment to $31 billion across 1,151 deals, led by big spending in OpenAI, Anthropic and Inflection. This compares to $2 billion in 68 deals in China, a big drop from 2022’s $5.5 billion in 377 deals. The decline is partly attributed to restrictions on US venture investment in China.

“China is at a huge disadvantage in creating a foundation model for general AI,” said Rui Ma, an AI investor and co-founder of investment syndicate and podcast TechBuzz China.

But while China lags behind the basic models dominated by OpenAI and Google’s Gemini, Meta’s open source, big language models Lama1 and Triolo said Chinese contenders, if lagging behind, are improving on the US model.

“Many China models are effectively forks of Llama, and the consensus is that these forks are one to two years behind leading US companies OpenAI and its video-to-text model Sora,” Ma said.

China has the tech talent to make a difference in the AI ​​race in the coming years.

A new study Marco Polo, a think tank run by the Paulson Institute, shows that the US It is home to 60% of the top AI organizations, and compared to China, the US 57% of the total is the leading destination for elite AI talent. 12%. But the research found that, including being ahead of the US in producing top-level AI researchers based on undergraduate degrees, China trailed at 47% and the US at 18%. Additionally, among top-level AI researchers working at US institutions, 38% have China as their country of origin, compared to 37% in the US.

New Chinese general AI market entries can also quickly reach mass adoption. Baidu’s ChatGPT competitor, Ernie Bot, which was released in August 2023, reached 100 million users by the end of the year. Samsung is planning to integrate Baidu’s Ernie AI into its new Galaxy S smartphones while in another high-profile development in US-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 the most advanced, according to Leong.

Several other Chinese companies are stepping up, funded by major players in its own technology market. Big cloud companies like Baidu and Alibaba, social media players ByteDance and Tencent, and tech companies SenseTime, iFlyTek, Megvii and Horizon Robotics, as well as research institutions, are all helping the effort.

Moonshot AI, funded by Chinese e-commerce giant Alibaba and VC firm Hongshan (formerly Sequoia China), is building large language models that can 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 Synovation Ventures.

While China has boosted its indigenous chip industry and the development of advanced AI, its AI development has been limited in part by US restrictions on the export of high-end AI chips, a market cornered by Nvidia. US and China.

“Despite efforts to develop indigenous solutions, Chinese AI developers still largely rely on foreign hardware, particularly from US companies, which is a weakness in the current geopolitical environment,” said Bernard Leong, founder and CEO of tech advisory Analyze Asia in Singapore.

The US And ongoing tensions between China over technology innovation and national security issues have led to a split in general AI development, following the pattern of other dominant technologies caught in a superpower tech arms race. Given the regulations and restrictions on sensitive, advanced technologies, the likely outcome is two parallel ecosystems for gen AI, one in the US and one in China. ChatGPT is blocked in China while Baidu’s Ernie Bot can only be accessed in the US with a mainland Chinese cell phone number. “US companies can’t go to China and Chinese companies can’t go to the US,” Xiao said.

US Commerce Secretary Gina Raimondo has said that US restrictions on AI chip exports are aimed at preventing China from acquiring or manufacturing advanced chips. As Mainland China focuses on homegrown capabilities, Chinese companies SMIC or Huawei could be an alternative to Nvidia. But if export restrictions cut these companies off from the most advanced designs for production, the future for alternatives is uncertain. Triolo notes that Huawei has recently developed a series of AI chips to rival Nvidia.

China is leading the way in applying AI in certain categories such as computer vision. “Chip scarcity is very important for training fundamental models where you need specific chips, but for applications, you don’t,” Ma said.

The “real killer app” for public AI, according to Triolo, will be in companies that are willing to pay to use the technology as part of their business operations. Alibaba is focusing on integrating AI into its e-commerce ecosystem. Huawei, while competing more successfully against Apple’s iPhone in the consumer market in the past year, also has broader ambitions, using its in-house hardware to develop AI for specific industries, including mining, Leong said.

Boston Consulting Group research suggests it may be some time before this broader gen AI market emerges from tech. Sixty percent of the 1,400 executives surveyed are waiting to see how gen AI rules evolve, while only 6 percent of companies have trained their employees on gen AI tools.

AI and tech issues are front and center for China’s leadership, with the country rolling out guardrails on AI in 2023 after the success of ChatGPT, and then changing some measures.

Many Chinese developers using open-source Gen AI technology could encourage global collaboration and lead to shared insights as AI advances, but Leong said open-source models need to ensure quality and security, as well as manage bias and potential. leads to problems related to doing. Abuse of AI.

“China wants to make sure stuff doesn’t get out. They also want their companies to take the lead and are willing to rule in tough measures,” Triolo said.

Ethical and social concerns have hindered the progress of general AI in China as well as in other regions, including the US, as seen in the battle for control of OpenAI’s mission. Within China, there is another factor that could slow AI acceleration, according to Leong: maintaining control over general AI applications, particularly in areas sensitive to state interests.

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