China’s crowded and closed generative AI market is facing a shakeout, analysts say

The US-China tech war, focused on chips and AI, is driving a split between the tech ecosystems of the two countries

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More than a dozen Chinese AI and GPU companies have emerged amid the country’s quest to meet surging demand for computing power. Photo: Shutterstock Images

Published: 8:00pm, 1 Nov 2024

China’s crowded and closed generative artificial intelligence (AI) market, in which at least 100 large language models (LLMs) are jostling for attention and revenues, is facing consolidation, according to analysts.

One implication is that China’s AI start-ups will pivot to revenue-generating applications instead of pouring resources into basic research, an approach that would differentiate them from the US.

“We saw a lot of debates this year whether the market will become saturated due to homogeneous models,” said Su Lian Jye, chief analyst with research firm Omdia, during a conference on Thursday.

Developing big models has become more expensive as they require thousands of graphics processing units (GPUs) to generate the required computing power. Su said this requirement sets a higher bar for companies wanting to compete in the sector, and that the market will consolidate with smaller players being pushed out.

In China, at least 100 large language models (LLMs) are jostling for attention and revenues. Photo: Shutterstock Images

“The list of companies capable of continuing this expensive undertaking will become shorter,” Su said.