Finance
Chinese AI applications are looking to move beyond chatbots
The World Artificial Intelligence Conference in Shanghai on July 6, 2023.
Aly Song | Reuters
BEIJING — A slew of releases last week demonstrate how Chinese companies such as DeepSeek and ByteDance have moved quickly with artificial intelligence models that compete with OpenAI’s ChatGPT.
Now, many companies in China are increasingly building on that foundation to develop products that look to go beyond a chatbot.
Baidu, best known for its search engine and Ernie chatbot, said Tuesday its generative AI-integrated Wenku platform for quickly creating powerpoints and other documents had reached 40 million paying users, with revenue up 60% from a year ago as of the end of last year. Updated features, such as using AI to generate a presentation based on a company’s financial filing, started being rolled out to users in the last week.
On the corporate side, Gartner data and analytics director analyst Ben Yan estimates more than 10% of businesses in China are using AI, up from 8% about six months ago. That would be a pickup in pace — the last 2 percentage point increase in adoption took more than a year, he said Wednesday.
“With our clients, we hear more and more success stories,” he said in Mandarin translated by CNBC. Yan noted that so-called AI agents will help speed up corporate implementation of the new tech.
AI models focus on specific functions such as search and generating summaries, whereas AI agents are more advanced — they can automate entire processes from searching to booking. One example is OpenAI’s new “Operator” function that claims to be able to make restaurant reservations on behalf of a ChatGPT user.
AI agents are also on the verge of coming to the Chinese market at scale.
Tencent plans to soon integrate AI agents with its messaging and social media app WeChat, CEO Pony Ma told staff in a Jan. 13 speech, according to a copy of the annual address seen by CNBC.
“We believe that China’s AI sector is advancing at a pace comparable to that of the United States,” Jo Huang, head of private equity at Raffles Family Office, said in an email. She said the firm is considering investing in a leading China AI deep tech fund in order to capture the local opportunity.
The development of Chinese AI applications creates features that are being integrated with domestic smartphones. Apple’s AI intelligence functions have yet to come to iPhone users in China.
“There is also a shift towards a growing user preference for local brands that can offer advanced AI features tailored to regional consumer preferences,” Wei Sun, principal artificial intelligence analyst at Counterpoint Research, said in an email Thursday.
She pointed out that Chinese smartphone companies such as Honor, Xiaomi and Vivo have been able to improve user experience of AI features, thanks to efforts to improve the efficiency of AI models that can run on the device without relying heavily on an internet-connected cloud service.
Compliance hurdles
The latest developments also reflect a difference in regulatory scrutiny with the U.S., and with the kind of technology being created.
Baidu’s ChatGPT-like Ernie bot didn’t get Beijing’s green light for a public rollout until August 2023, nearly one year after ChatGPT took the world by storm.
While AI models must get official certification for use in China, using them in applications is much easier, said Alex Lu, founder of Shanghai-based LSY consulting. On the side, he is working with a small team on an AI-powered tool for giving companies targeted daily insights on industry trends and global regulations, similar to the work of a human consultant.
Half a year after development began in June 2023, Lu said the team began testing a product for free with potential customers, including a manufacturer of car batteries. That has provided the feedback for a product the team hopes to charge 70,000 yuan to 100,000 yuan ($9,660 to $13,790) in annual license fees, Lu said.
But a bigger challenge can be getting companies to give AI access to proprietary data, or using AI-generated content commercially.
“I think [multinational corporations are] much more cautious than Chinese brands because of copyrights and legal issues,” Chris Reitermann, CEO of Ogilvy Asia-Pacific and Greater China, told CNBC late last year. He is also president of WPP China.
He said clients attempted to use AI for campaigns, only to run into compliance issues that prevented the projects from being launched. “Local brands, they may be a little less worried about these issues, more trial and error,” he said.
AI for global users
Some China-created AI applications are also being used overseas. Alibaba‘s international arm announced earlier this month that Accio, its AI-powered search engine for product sourcing, had reached 500,000 small business users.
Launched in November, Accio lets businesses use a few text or image prompts to find wholesale products — and provides them with analysis on their popularity with consumers and projected profit.
Accio cut the research time down from weeks to a day or so, said Mike McClary, who got early access to Accio and has sold camping lanterns and other products online for more than 10 years. McClary, CEO of amazing.com, claims e-commerce sales of more than $1 million a year and is based outside of St. Louis, Missouri.
He said Alibaba.com and Amazon, which he previously used, involved going through hundreds or thousands of results, and then individually negotiating with five to 10 suppliers before settling on one. The “next gamechanger,” McClary said, would be to use AI to put an image of a product into any scenario to create an advertisement.
A young Chinese AI startup DeepSeek sparked a massive rout in U.S. technology stocks on Monday as its highly competitive — and potentially shockingly cost-effective — models stoked doubts about the hundreds of billions that America’s biggest companies are spending on artificial intelligence.
DeepSeek’s emergence is shaking up investor confidence in the AI story that has been lifting the U.S. bull market the past two years. It calls into question the hype around Nvidia’s chips and rippled all the way through the market to hit shares of power producers who were set to get a boost from AI data center demand.
Here’s how the DeepSeek-triggered market sell-off on Wall Street unfolded:
New Reasoning Model
DeepSeek was founded in May 2023 by Liang Wenfeng, who partly funded the company by his AI-powered hedge fund. In late December, the AI developer launched a free, open-source large language model that it says took only two months to develop and less than $6 million to build.
On Jan. 20, the Hangzhou, China-based DeepSeek released R1, a reasoning model that outperformed Open AI’s latest o1 in many third-party tests.
DeepSeek is seeking to differentiate from its competitors with its reasoning capabilities, meaning that before delivering the final answer, the model first generates a “chain of thought” to enhance the accuracy of its responses.
Top-performing Model
The buzz around DeepSeek’s R1 seemingly picked up steam after Alexandr Wang, CEO of ScaleAI, touted its competitiveness against the best products from the U.S. megacap tech giants, which most had thought were leading the AI war.
“What we found is that deep seek, which is the leading Chinese AI Lab, their model, is actually the top performing, or roughly on par with the best American models,” Wang, whose company provides data to help companies train their AI tools, said on CNBC from the World Economic Forum in Davos, Switzerland last week.
Wang noted that DeepSeek actually has more H100 chips from Nvidia than expected — about 50,000 of them. Those chips are the processor of choice for AI firms in the U.S. such as OpenAI and the U.S. has banned the sale of advanced AI chips to China.
Nvidia shares took a 3% hit on Friday as chatter about DeepSeek started to pick up.
No.1 App
But it wasn’t until the past weekend when the hype surrounding DeepSeek reached a fever pitch on social media.
Marc Andreessen, co-founder and general partner of venture capital firm Andreessen Horowitz, sang DeepSeek’s praises on X, saying the R1 model is “one of the most amazing and impressive breakthroughs” he’s ever seen. Andreessen’s portfolio includes Airbnb and dozens of AI companies.
Tech investor Chamath Palihapitiya on X pointed to DeepSeek’s “very good” report, which said its R1 model “essentially cracked one of the holy grails of AI: getting models to reason step-by-step without relying on massive supervised datasets.”
The Chinese AI app DeepSeek in Apple’s us App Store on an iPhone 12. In the ranking of free apps, DeepSeek was even ahead of ChatGPT from OpenAI.
Picture Alliance | Getty Images
By this point, DeepSeek’s mobile app surged to the top of Apple’s appstore download charts over the weekend in the U.S., marking a tangible threat to pricier models such as OpenAI’s ChatGPT.
U.S. futures were down big overnight Sunday and investors woke up to a sea of red Monday morning.
Nasdaq Composite, 1-day
AI darling and chip producer Nvidia saw shares tumbling more than 12% Monday, on track for its worst day since March 2020.
Nvidia, 1-day
Other chip makers as well as power providers were hit big. The tech-heavy Nasdaq Composite is down as much as 3.6% Monday, dragged down by megacap names.
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