Alibaba, Tencent Join $340 Million Funding for AI Startup Zhipu

(Bloomberg) -- Alibaba Group Holding Ltd. and Tencent Holdings Ltd. are among the influential Chinese investors that invested 2.5 billion yuan ($342 million) in AI startup Zhipu this year, part of a wave of capital flowing into a red-hot arena.

The country’s two largest tech firms joined rivals and peers from Ant Group Co. to Xiaomi Corp. in backing Beijing Zhipu Huazhang Technology Co., one of several private firms trying to build domestic rivals to OpenAI’s ChatGPT. HongShan, the former Sequoia China, and food delivery leader Meituan also took part, according to a company statement. Many of the same companies joined a recent $300 million round of financing for Zhipu-rival Baichuan.

Zhipu and Baichuan are among the better-known startups developing generative artificial intelligence, hoping to match the likes of Microsoft-backed OpenAI and Google. Venture capital firms and tech leaders are pouring billions into training and developing AI services, mirroring a wave of activity across Silicon Valley and Europe. On Tuesday, Baidu Inc. billionaire founder Robin Li declared his company’s large language model Ernie on par with OpenAI’s GPT-4, claiming the lead in that nationwide race.

Beijing-based Zhipu was among the first batch of Chinese firms to win government approval for a public rollout in August. It has since released an open source model as well as a chatbot it called Qingyan.

The interest in Zhipu and its peers underscores how the burgeoning US-Chinese competition in AI has broader implications. It’s expected to transform a plethora of industries from transport to media and finance, potentially powering a new phase of economic growth. The technology also has government and military applications that could complicate an already tense Washington-Beijing relationship.

The US this month tightened restrictions on Chinese access to advanced chips made by the likes of Nvidia Corp. and used to train and run AI models. Many Chinese industry experts say local AI developers may eventually have to turn to homegrown alternatives, though Washington has been adding AI chip design firms to its blacklist of restricted firms.