The mission of developing China's equivalent of ChatGPT has been taken up by tech giants, while smaller startups face challenges such as a shortage of AI chips and higher compliance costs due to strengthened regulations. Some startups are turning their focus to the global market, which presents its own set of challenges. With limited funding available, 2024 might be a year of reckoning for many AI startups in China.
Key takeaways:
- In 2023, despite the global interest in artificial intelligence, China saw a decline in investments in the AI sector, with a 38% decrease in investments and a 70% decrease in the total amount raised by AI firms compared to the previous year.
- Chinese AI startups face unique challenges, including the decrease in American venture capital, the prospect of listing on U.S. stock markets dimming due to geopolitical tensions, and the capital-intensive nature of AI startups which can deter risk-averse local funds.
- Amid the U.S.-China tech war, the shortage of AI chips and increased regulations have led to higher compliance costs for AI startups in China, with many lacking the resources to meet these requirements.
- With limited funding available, 2024 might be a year of reckoning for many AI startups in China, as they navigate challenges such as regulatory and political uncertainty, new user behavior, and the need for appropriate corporate structures to engage with foreign investors.