China's Tech Giants Compete to Invest $340M in OpenAI Competitor

It’s increasingly clear that two distinct AI ecosystems are emerging: one in the U.S. and the other in China. While the U.S. boasts prominent players such as OpenAI and Anthropic, China is cultivating its own contenders. Among these foundation model developers is Zhipu AI, which announced today that it has successfully secured a total of 2.5 billion yuan (approximately $340 million) in financing this year.

Founded in 2019, Zhipu AI originated from China’s esteemed Tsinghua University and is spearheaded by Tang Jie, a professor in the university’s Department of Computer Science and Technology.

This announcement arrives at a critical moment. Recently, the Biden administration imposed new restrictions on the export of Nvidia AI chips to China, further hindering the nation’s ability to develop large language models. In anticipation of potential semiconductor bans from Washington, China’s affluent AI companies have begun stockpiling semiconductors, investing hundreds of millions of dollars in these essential components.

To maintain its competitiveness in this expensive AI race, Zhipu AI is bolstering its funding through local investors. The $340 million funding round comprised yuan-denominated investments, signaling a shift from a two-decade trend favoring U.S. dollar-based financing, particularly as geopolitical tensions complicate tech collaborations.

In August, President Joe Biden signed an executive order that limits U.S. investments in critical technologies such as AI, semiconductors, and quantum computing in China. While aimed at curbing China’s military advancements, the order has instilled caution among American venture capitalists focused on China, many of whom are now steering clear of sensitive sectors. Some firms, like Sequoia Capital China—now rebranded as HongShan—and GGV Capital, are exploring ways to navigate the market by separating their China divisions.

HongShan, along with leading venture capital firms like Shunwei Capital and Hillhouse Capital, as well as a state fund managed by Legend Capital, played a pivotal role in backing Zhipu.

The AI startup also garnered support from an impressive lineup of Chinese tech giants, uniting even traditional rivals like Alibaba and Tencent—a rare occurrence in venture investments. Key participants include Ant Group, Alibaba, Tencent, Xiaomi, Meituan, Kingsoft, TAL Education Group, and Boss Zhipin.

Zhipu recently open-sourced its bilingual (Chinese and English) conversational AI model, ChatGLM-6B, which is designed with six billion parameters and claims the capability to perform inferences using a single consumer-grade graphics card. Additionally, it has released a foundational model, GLM-130B, trained on an expansive 130 billion parameters.

Zhipu AI is poised to be a significant player in shaping the future of generative AI in China.