Only DeepSeek, Alibaba, and ByteDance Will Survive AI Competition in China a...

(Image Credit: Photo by Lin Zhijia, AGI Editor at TMTPost)

TMTPOST -- In a recent speech at Tsinghua University, Wu Shichun, the founding partner of Plum Ventures, made a striking observation about the state of China's AI industry: "I originally thought the 'Six Tigers of AI Large Models' were paving the way for major tech companies, but now it seems even the big players are merely step stones for DeepSeek."

He went on to critique the so-called "unicorns" of the AI sector, many of which he likened to "unipigs"—companies that raise substantial funding but struggle to generate sustainable revenue.

This sentiment reflects the dramatic shifts in China's AI landscape over the past year. In March 2024, the "Six Tigers of AI Large Models"—Moonshot AI, Zhipu AI, Baichuan Intelligence, MiniMax, 01.AI, and StepAI—were riding high. Moonshot AI's Kimi intelligent assistant was gaining widespread acclaim, Zhipu was boldly benchmarking itself against OpenAI, and Wang Xiaochuan was outlining ambitious plans for a killer Super App.

However, just over 360 days later, the open-source AI model DeepSeek has taken the world by storm, amassing 100 million users in just seven days. This rapid ascent has prompted major internet companies like Baidu and Tencent, as well as small-to-medium enterprises and government agencies, to adopt DeepSeek's technology.

Today, the "Six Tigers of AI Large Models" are among the most impacted players in this wave of disruption. They have been forced to scale back operations and explore new paths to profitability. Baichuan has seen several co-founders depart to focus on the B2B medical sector; 01.AI has abandoned its development of ultra-large-scale trillion-parameter models in favor of embracing DeepSeek; MiniMax has reduced its B2B investments, shifting its focus to consumer-facing applications; and Zhipu has raised 4.8 billion yuan in just 93 days to stockpile resources for the challenges ahead.

Management consulting firm Roland Berger has highlighted that in the realm of AI applications in China, ByteDance's Doubao and DeepSeek have emerged as dominant gateways. Data from February 2024 indicates that the monthly active user gap between Doubao or DeepSeek and the third-place Kimi has widened to 36 million.

Meanwhile, newcomers like Tencent's Yuanbao have achieved significant growth by leveraging the seamless experience provided by DeepSeek's model and aggressively investing in user acquisition. In contrast, older AI assistants like Wen Xiaoyan and Zhipu Qingyan are facing stagnation due to slower growth rates.

On March 21, Kai-Fu Lee, the founder and CEO of 01.AI, noted that the industry transformation triggered by DeepSeek has completely disrupted the development model of the AI industry, potentially causing sleepless nights for OpenAI's founder. He predicted that the Chinese market might eventually be dominated by just three major AI model companies: DeepSeek, Alibaba, and ByteDance, with DeepSeek currently leading the charge.

Lee emphasized that investors in both China and the United States are increasingly reluctant to bet on expensive foundational model companies. Instead, they are more inclined to invest in AI applications, consumer-facing products, and innovative enterprises focused on AI infrastructure.

DeepSeek's innovations in algorithms, architecture, and engineering solutions stem primarily from constraints in computing power. These constraints make such innovations almost uniquely possible in Chinese companies, as they are the ones simultaneously facing "immense demand and immense limitations." Consequently, DeepSeek's innovations are difficult to replicate outside of China.

The success of DeepSeek has sparked heightened activity among domestic investors and government agencies, shifting the narrative toward "China's AI capabilities surpassing those of the U.S." However, Liu Zhiyuan, an associate professor in the Department of Computer Science at Tsinghua University, cautioned that AGI technologies are still evolving rapidly, and the future development path remains unclear.

As the AI industry continues to evolve, the competition is becoming increasingly complex. While DeepSeek has emerged as a formidable player, the future landscape remains uncertain. The "Six Tigers" are striving to find a path toward sustainable development, but their success will depend on their ability to adapt to a rapidly changing market.

As Lee noted, the future competition in the large model industry will no longer solely revolve around model performance but will also depend on the ability to transition from middle platforms to applications. This means whether the model can quickly respond to scenario demands and build industry-specific applications.

In the meantime, the battle of large AI models is far from over, and a clear winner is unlikely to emerge in the short term. Intense competition continues across dimensions such as technological research and development, market expansion, and application innovation. The future competitive landscape is becoming increasingly complex, and it remains uncertain who will ultimately prevail.

However, one thing is certain: DeepSeek has become a thorn to some U.S. companies. On March 13, OpenAI submitted a 15-page letter to the White House, urging the U.S. government to ban DeepSeek and recommending the implementation of AI technology export controls to restrict the flow of AI technologies to countries like China.

Although the U.S. currently maintains its lead in the AI field, the emergence of DeepSeek indicates that U.S. firms are struggling to maintain its competitive edge, said Chris Lehane, OpenAI's Deputy Director of Global Affairs.