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More AI start-up closures tipped as funding tightens
Competition set to intensify with A-share market hosting over 400 firms from AI sector
Janette Chen 1 Feb 2024

Artificial intelligence (AI) was one of the most discussed topics in the recent World Economic Forum. But if last year saw a surge of funding in this technology segment, 2024 is expected to witness the closure of several AI start-ups, according to a joint report by two Chinese think tanks.

The global AI market size reached US$207 billion in 2023. In China, over 400 A-share-listed companies are deeply entrenched in the AI industry and its supply chain as of December 2023, the South Financial Compliance and Technology Research Institute and the China Academy of Social Sciences note in a report forecasting AI development trends for 2024.

The Science and Technology Innovation Board (STAR Market) currently lists ten AI-related firms with a market capitalization of over 400 billion yuan (US$55.72 billion). These companies encompass AI chips, industry-scale models, intelligent robots, computing, and 3D vision, indicating a saturated market.

The crowded and competitive landscape favours large enterprises with more resources and brand advantages, intensifying challenges for AI start-ups.

Funding is becoming more difficult, especially for those with a high cash burn rate but without any substantial commercialization. Successful commercialization hinges on close integration with actual business scenarios, the report says.

Beyond intense competition and funding challenges, AI firms grapple with additional issues. Copyright concerns arise amid the rapid development of generative AI technology. For example, firms often source data for large language model training from online platforms without informing the original authors, a practice that can lead to copyright infringement disputes.

The report anticipates a surge in copyright dispute cases in 2024 as AI technology applications continue to grow. Regulatory uncertainties may further escalate costs for AI firms involved in data security and compliance practices.

Despite these hurdles, opportunities still exist as AI continues to transform various industries. The report notes that AI adoption has reached approximately 30% of the market, benefiting sectors such as finance, gaming, education, and healthcare.

Looking ahead, the report predicts stronger performance for open-source AI models, which are poised to rival closed-source counterparts. The rise of AI agents is expected to support the practical application of large models, while embodied AI represents the next pivotal exploration in AI development.

Moreover, the development of new data and intelligent computing centres is emerging as a significant trend, providing more comprehensive computing capabilities to meet the intelligence needs of diverse industries.

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