Chinese VC and AI Founder Predicts Shakeout in China’s AI Sector

China’s generative artificial intelligence startup sector is going through the “qualifying round,” according to Kai-Fu Lee, a venture capitalist and former president of Google China, who earlier this year founded 01.AI, a Beijing-based startup developing large language models, which last month raised a funding round at a $1 billion valuation.

The biggest internet companies in China, such as Alibaba, Tencent, Baidu and ByteDance, as well as dozens of startups, are all developing their own LLMs, in what local media have described as “a war of 100 models.” The Chinese government blocks OpenAI, Google and other U.S. internet services, so domestic firms are vying for AI supremacy. In an interview, Lee said companies are in the phase of trying to prove they have the technology to build a high-quality model. Those who pass that test will move on to the next phase, which will be about how to grow revenue and eventually generate profit.