Chinese internet giants are betting big on artificial intelligence as Beijing seeks to rival US on tech ‘paradigm shift’

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Chinese tech giants Tencent and Alibaba touted AI as a transformative technology for corporate earnings calls this week.

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Chinese tech giants are banking on AI to bolster their businesses, touting new features for their existing services and new generative AI tools, as the hype around the technology reaches dizzying heights.

Alibaba, Tencent AND Baiducollectively known as “BAT,” they’ve all sung the praises of generative AI, a subset of artificial intelligence that deals with tools that can invent text, images, and other content in response to user requests on corporate profit calls of this month.

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Built on ChatGPT, the popular Microsoft-backed AI chatbot that has become known for its ability to hold more human conversations, such systems have attracted huge investor interest and a heated race among companies looking to incorporate the technology. or develop your own alternatives.

In the case of Chinese companies, AI tools are expected to be more restrictive in terms of what users can and cannot say due to Beijing’s tight grip on internet services in the country.

But the Chinese government has not decided to phase out ChatGPT-like products, although ChatGPT itself remains inaccessible in the country. Instead, Beijing has introduced new rules to manage how companies develop such tools.

Chinese tech giants have been quick to take advantage of that more open attitude towards new technological innovations, in stark contrast to their approach to cryptocurrencies.

‘Paradigm Shift’

Chinese tech giants last week expressed their belief that they see generative AI as a technological revolution. “Generative AI represents a huge opportunity for us. It can be compared to the introduction of the Internet and smartphones,” said Robin Li, CEO of Baidu, during the company’s first quarter earnings call.

Hard to see how China can win AI competition if chip bans keep happening: Hong of Grow Investment

“To seize this opportunity, we leveraged our technological capabilities and our extensive experience in research, the knowledge graph and dialogue,” he added.

Baidu said it was awaiting regulatory approval for its chatbot service Ernie Bot, a rival to OpenAI’s ChatGPT.

On Wednesday, Tencent confirmed the existence of a so-called core model it is working on, called HunyuanAide. Core models are large AI programs that are trained on large amounts of data so they can be adapted to solve a wide variety of tasks.

Meanwhile, Tencent president Martin Lau said the company was “making good progress” with the technology. “I think a key strength for us is obviously the use cases,” Lau said on the company’s first-quarter earnings call. “We have different products [and] the teams are already planning some exciting offers alongside their products.”

Alibaba, which developed its own ChatGPT-style generative AI tool Tongyi Qianwen earlier this year, said its system could help accelerate customer adoption of its cloud computing service. So far, Alibaba has seen large demand for Tongyi Qianwen, with 200,000 business customers requesting trial access.

“The development of AI technology represents a huge new opportunity for the cloud business because AI applications will result in an exponential increase in the demand for computing power,” said Daniel Zhang, the company’s CEO, during the call. fiscal fourth quarter earnings.

“This kind of computing power has to be provided as some sort of public service or infrastructure. So, this is a huge opportunity for the future.”

Zhang’s comment came as Alibaba announced plans to spin off its cloud computing unit as a separately listed entity.

The tech giants’ ambitions on AI reflect a global escalation in the arms race that is now underway as countries seek to gain leadership over technology. Microsoft AND Googletwo of the biggest tech companies, currently dominate the AI ​​conversation with their respective advanced language processing technologies.

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Dan Ives, chief equities chief of Wedbush Securities, told CNBC that generative AI is seen as a “paradigm shift” in the tech sector. China, in particular, “has some of the most advanced AI technology in the world,” he added.

“We believe this is a Game of Thrones also playing out in the China Tech market as the gloves are ready for this battle,” Ives said.

“Big Tech backers like Alibaba, Tencent, and Baidu, among others, are trying to put an iron fence around its AI installed base. Many innovative vendors are pursuing this market, and Chinese tech is now in the thick of it. of a secular change around AI.”

Comments from some of China’s top tech firms last week suggest Beijing is looking to ramp up its rivalry with the US over artificial intelligence.

There have been concerns, however, that a US ban on Chinese companies buying advanced chips and chip-making equipment could hamper China’s AI progress. Alibaba, Baidu and Tencent do not make their own chips, instead relying on similar chip makers Nvidia to get the processors they need for their cloud computing operations. This makes them vulnerable to US sanctions

Over the weekend, China banned its domestic companies from buying equipment from US chipmaker Micron in retaliation for US sanctions.

“I think going forward, obviously AI requires a lot of computing power, so as a result, it’s hard to see how China can win this competition if it keeps banning this crucial technology from its AI sector.” Hao Hong, chief economist at Grow Investment Group, told CNBC’s “Squawk on the Street” on Monday.

For its part, Tencent said the chips are still “widely available” for now and that there are “some workarounds” that allow it to continue to maintain access to graphics processing units in China. These GPUs are used to power AI applications.

AI with limits

One thing that was clear from earnings reports and calls from Chinese tech giants last week was that they are aware of and willing to comply with an impending regulatory tightening on artificial intelligence.

“We believe the government’s overall stance is in favor of regulation, but the industry needs to be regulated,” said Tencent’s Lau. “And I think this is not something specific to China. If you look at the United States, there’s a lot of public discussions about having regulation.”

Baidu’s Li said the company “has put a lot of effort into technology and compliance development to ensure that our products and services meet applicable regulatory requirements.”

“For important and sensitive topics, we have to make sure that the AI ​​does not hallucinate. Since LLM is more or less a probabilistic model, this task is by no means trivial,” he added. LLMs are large language models, i.e. advanced artificial intelligence algorithms trained on huge data sets to process, understand and produce human language.

“The requirements aren’t final yet, so we need to keep updating our strategy as it evolves.”

It comes on the heels of a massive crackdown by China on its domestic tech businesses, which only began to decline after wiping $1 trillion off the market value of the combined industry.

China had taken tough measures against some of its most valuable tech companies, from Alibaba and Tencent, to Didi and Meituan, in moves that have been interpreted as keeping companies in line and preventing them from abusing their market power.

CLOCK: Can Chinese clones of ChatGPT give it an edge over the US in an AI arms race?

Can Chinese clones of ChatGPT give it an edge over the US in an AI arms race?

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