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OpenAI is further restricting access to its AI models for developers in mainland China, presenting opportunities for other firms to capture a larger share of the sizeable Chinese userbase. A number of domestic tech firms, including Alibaba and Baidu, are offering tokens and free migration services to move applications over to their platforms. Baidu’s Ernie Bot is the current Chinese AI leader in terms of users, but Alibaba recently led a fundraise of $1 billion for one of its primary competitors in Moonshot AI – developer of the Kimi chatbot. 

The US’s growing body of trade restrictions related to Chinese AI, as well as adjacent technologies like semiconductors, are a key reason OpenAI is steering clear of the country. It is increasingly difficult for Chinese enterprises to acquire the advanced chips they will need to support the growth of machine learning adoption and will need to find workarounds. TikTok owner ByteDance is developing unique processors to ensure a stable supply of higher-end chips to the company by partnering with Broadcom.

Related ETF: Invesco China Technology ETF (CQQQ)

Earlier this week, Reuters reported that OpenAI, the creator of ChatGPT, plans to further restrict access in certain countries to its application programming interface (API), a platform that allows developers of other products to integrate its AI models. Among this cohort is China, where ChatGPT is already unavailable, but OpenAI’s API is still operational. That accessibility is expected to be shuttered by July 9, according to emails sent out by the startup. Microsoft, which holds a significant stake in OpenAI, said it would allow customers in Hong Kong to continue using OpenAI’s artificial intelligence (AI) models through its Azure cloud computing platform.

Still, the full-on withdrawal of the global leader in large language models (LLMs) from the mainland Chinese market leaves a massive zone of opportunity open for competitors to pounce upon. Local tech giants Baidu and Alibaba are targeting former OpenAI users directly, offering complementary tokens on their own AI platforms, as well as free migration services for developers. Bloomberg notes that at least a half-dozen companies and startups, which also included Tencent Holdings Ltd. and Zhipu AI, began offering similar incentives to users making the switch.

As of April, Baidu claimed its AI chatbot “Ernie Bot” has garnered more than 200 million users, retaining its position as China’s most popular ChatGPT-like application. The number of enterprise clients for the chatbot allegedly reached 85,000. In March, Apple chose Baidu’s Ernie Bot for generative AI intelligence its iPhone 16, Mac OS and iOS 18 in China. That followed Samsung Electronics’ move to integrate the Ernie LLM into Galaxy S24 series devices sold in China. Apple also held talks with other Chinese companies including Alibaba, but…

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