Saudi Fund Invests In China’s Biggest AI Start-Up

A Saudi Arabian investment fund has reportedly taken part in an investment round into one of China’s main generative artificial intelligence (AI) start-ups, the first time a foreign company is known to have invested in China’s drive to create competitors to the likes of ChatGPT from Microsoft-backed OpenAI.

Prosperity7, part of the venture capital arm of state-owned oil group Aramco, participated in the roughly $400 million (£314m) investment round into Zhipu AI, which values the start-up at about $3bn, according to reports from the Financial Times and other news outlets, citing unnamed sources.

The $3bn fund was a minority investor in the Zhipu round, reports said, in an indication that Saudi Arabia is willing to push for global competition in artificial intelligence players outside the US.

“The Saudis don’t want Silicon Valley dominating this industry,” an unnamed person close to the fund told the FT.

AI funding

Saudi Arabia has become an important funding source for Chinese tech companies, with Lenovo saying last week it issued $2bn of convertible bonds to Alat, a subsidiary of Saudi Arabia’s Public Investment Fund sovereign wealth fund, in exchange for which the company is to set up a regional headquarters in Riyadh and build a manufacturing plant in the kingdom.

Zhipu is China’s largest artificial intelligence start-up by number of staff, with more than 800 employees in its Beijing headquarters, and previously raised funds from Alibaba Cloud, Tencent and Meituan, as well as state investors.

Other major start-ups in the field include Moonshot AI, MiniMax and 01.ai, with major tech firms such as Baidu, Alibaba and Tencent also offering their own generative AI tools,

Chinese companies had developed some 238 generative AI large language models (LLMs) as of last October, Robin Li, the founder, chairman and chief executive of search giant Baidu, said in a November speech.

US restrictions

The US has placed restrictions on domestic investors contributing to China’s AI efforts, and has pressured allied countries to take similar measures, while also restricting exports of key AI infrastructure tools such as Nvidia accelerator chips.

As a result China’s AI start-ups have to date raised funds mostly from domestic tech giants and government sources.

Investors such as Japan’s SoftBank and the US’ Tiger Global contributed to previous generations of Chinese tech start-ups, such as SenseTime and Alibaba Group, in which SoftBank owns a roughly 14 percent stake.

AI and semiconductors are two areas in which China is investing heavily to lessen its dependence on the West.