OpenAI Competitor Zhipu AI Secures $400M from Saudi Arabia's Prosperity7

Microsoft Corp MSFT backed OpenAI’s rival in China, Zhipu AI, is attracting significant foreign investment from Saudi Arabia’s Prosperity7, a part of Aramco’s venture capital arm.

Prosperity7’s $400 million investment in Zhipu AI values the start-up at approximately $3 billion, making it the first notable foreign backer for one of China’s leading generative AI companies.

Zhipu AI, along with its peers Moonshot AI, MiniMax, and 01.ai, has traditionally relied on support from government funds and local cloud providers, the Financial Times reports.

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Prosperity7’s minority stake in Zhipu’s investment round underscores that “The Saudis don’t want Silicon Valley dominating this industry,” stated a source close to the fund.

The geopolitical implications of this investment are significant. Washington’s ban on certain U.S. investments in China’s AI sector and tightened export controls on high-end chips has kept top global tech investors like SoftBank and Tiger Global cautious.

For Zhipu AI, foreign investment offers a chance to expand into new markets beyond China, where enterprise service payments are typically low.

Additionally, this investment is part of a larger Saudi strategy to enforce stringent requirements on tech deals, which is evident in recent agreements like Lenovo’s $2 billion convertible bonds issue to Alat, a subsidiary of Saudi Arabia’s Public Investment Fund.

The U.S. just halted AI chip exports to the Middle East, citing national security concerns. The move has wider repercussions on companies like Nvidia Corp NVDA and Advanced Micro Devices Inc AMD, which are recuperating from the loss of their major market, China.

Recent reports indicate that China is working on a new AI model based on President Xi Jinping’s political philosophy as it struggles to create its AI-powered chatbot, ChatGPT, which the U.S. banned in China.

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