Chinese AI Initiatives Are Falling Behind in Global Competition

China's startups developing artificial intelligence applications are experiencing a significant lag in terms of global recurring revenue compared to their U.S. counterparts. This situation is making international expansion a necessary strategy for local firms. According to a new report, as of August, only four of the top 100 artificial intelligence applications in the world belong to Chinese companies.

According to a report published by Unique Research and Tech Buzz China, these four Chinese companies - Glority, Plaud, ByteDance, and Zuoyebang - have generated approximately 447 million USD in revenue. This figure accounts for only 1.23% of the total revenue of the top 100 applications, which is 36.4 billion USD. The report also does not include applications from publicly traded tech giants like Alibaba Group Holding and Tencent Holdings.

According to assessments, the reason for this gap is the structural issues within China's second-largest economy and startups focusing on short-term revenue sources. Rui Ma, founder of Tech Buzz China, states that "targeting global consumers and businesses requires significantly more capital." He also emphasized that Chinese startups do not find funding as easily as those in the U.S..

The companies defined as Chinese startups in the report are those located in the mainland, but also include those registered in the U.S. like Plaud. The highest-ranked Chinese artificial intelligence application is Glority, based in Hangzhou, which has approximately 173 million USD in predicted recurring revenue (ARR) from its popular plant identification application PictureThis, placing it at 20th.

The standout names in the report are fundamental model developers from the U.S. like OpenAI and Anthropic, which rank first with approximately 17 billion and 7 billion USD in ARR, respectively. Delta Wu, manager at Unique Research, explained that ARR estimates were made by tracking traffic redirected from the official website of each AI product to third-party payment platforms.

Additionally, 19% of the highest-grossing Chinese AI applications generate a significant portion of their revenue from overseas. This indicates potential for growth in international markets. In recent years, high-profile Chinese AI startups like HeyGen and Manus have been seen moving abroad due to increasing U.S. scrutiny.

While the domestic market offers an important area for AI startups to initially build their user base, international markets present significant growth opportunities, especially in the business software segment. Rui Ma points out, "Clearly, many investors in China are no longer even considering investing in AI software startups," highlighting the rise of other AI-related investment areas such as robotics technology.