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Companies around the world usually have the ability to buy market share when they have enough cash. In China, however, being the first mover gives an advantage that even similar investments cannot overcome. This is why the recent launch of China’s own versions of ChatGPT is so significant.
Four Chinese tech companies are now offering AI chatbots to the public after receiving government approval. These chatbots include Ernie Bot from Baidu, China’s leading internet search provider, and SenseChat from SenseTime, a dominant player in facial recognition technology.
This launch is a major success for these companies, as the Chinese government has been cautious about AI chatbots in the past. However, they are now permitting them after rigorous scrutiny. Many feared that strict regulations would cause long delays in these launches.
Baidu and SenseTime see AI chatbots as a way to strengthen their competitive advantage, which has been declining. While TikTok, Alibaba, and BYD have dominated areas like short videos, e-commerce, and electric cars as first movers, Baidu and SenseTime have lagged behind. The popularity of US services like OpenAI’s GPT-4 has prompted Beijing to encourage the development of domestic alternatives to avoid falling further behind in AI.
However, the problem for the Chinese government is that generative AI could create content that challenges its authority. Unless Beijing allows chatbots to develop through public interaction, their capabilities will remain limited.
On Thursday, shares in Baidu and SenseTime rose as investors hope that these companies will take a leading position in the AI chatbot market. Both companies face challenges in their core businesses, with Baidu trading at a significant discount to global peers and SenseTime experiencing a decline in its share price and negative operating margins.
Chinese chatbots also need to overcome challenges such as a shortage of high-end US AI chips. Nevertheless, Baidu and SenseTime can rely on Beijing to protect their home market from US rivals.
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