China’s AI ‘War of a Hundred Models’ Heads For a Shakeout

China’s craze over generative artificial intelligence has triggered a flurry of product announcements from startups and tech giants on an almost daily basis, but investors are warning a shakeout is imminent as cost and profit pressures grow. The buzz in China, first ignited by the success of OpenAI’s ChatGPT almost a year ago, has given rise to what a senior Tencent executive described this month as “war of a hundred models”, as it and rivals from Baidu to Alibaba to Huawei promote their offerings. China now has at least 130 large language models, accounting for 40% of the global total and just behind the United States’ 50% share, according to brokerage CLSA.

Additionally, companies have also announced dozens of “industry-specific LLMs” that link to their core model. However, investors and analysts say that most were yet to find viable business models, were too similar to each other and were now grappling with surging costs. Tensions between Beijing and Washington have also weighed on the sector, as U.S. dollar funds invest less in early-stage projects and difficulties obtaining AI chips made by the likes of Nvidia start to bite. “Only those with the strongest capabilities will survive,” said Esme Pau, head of China internet and digital asset research at Macquarie Group, who expects consolidation and a price war as players compete for users.