Chinese Investors Are Growing Wary of Investing in AI Startups

Chinese investors are beginning to lose interest in AI startups in mainland China. At least two prominent figures have complained in recent times that there are too many large language models (LLMs) in the country, but only a few have successful applications.

Investing in AI LLM Startups Makes No Sense

Allen Zhu Xiaohu, known for his early investment in ride-hailing giant Didi Chuxing, recently told Tencent News that it “makes no sense” to invest in LLM startups because they have “neither [the relevant application] scenario nor data” to create a successful business model.

“How do you make money out of just developing an LLM?” Zhu asked. 

Zhu previously invested in two startups, an AI job interviewer and an AI advertising producer, before OpenAI released ChatGPT in November 2022, which fueled the AI frenzy around the world. However, Zhu said he didn’t invest in any LLM startups on the mainland last year and still doesn’t plan to fund any. 

“I believe in applications and those that can commercialise immediately,” Zhu said, noting that those still investing in LLM startups are doing so out of the “fear of missing out.” 

Baidu CEO Says LLM Startups Are “Waste of Resources”

Zhu reiterates a similar statement by Robin Li Yanhong, the CEO of Baidu, China’s internet search engine, who said LLM startups are “a huge waste of resources.”

As of October 2023, Li said there were 238 AI models launched in the country, but there were hardly any successful AI applications known to the public. “There are too many big models in China, but too few AI-native applications based on those models,” Li said, urging the government to push for greater application development initiatives. 

“If our industry policies can be more encouraging on [creating more] AI-native applications based on the big models, we will surely create a prosperous AI ecosystem and drive a new round of economic growth,” Li said.