(Bloomberg) -- Tencent Holdings Ltd. has contributed to a $300-plus million round Chinese generative AI startup Moonshot just closed, emulating its arch-rival Alibaba Group Holding Ltd. in fostering several hopefuls in the highly contested sector.
The fundraising propelled Moonshot’s valuation to $3.3 billion and attracted other investors including Gaorong Capital and existing backer Alibaba, people familiar with the matter said, asking to not be identified discussing private information. The Information earlier reported that Moonshot was seeking investments at a pre-money valuation of $3 billion and had held talks with Tencent.
Representatives from Moonshot and Gaorong declined to comment in separate messages. Tencent and Alibaba didn’t respond to emailed requests for comment.
The deal is the latest among a flurry of investments into Chinese AI enterprises, as local big-tech firms and venture capital powerhouses alike have sunk billions of dollars to bankroll a costly battle to fill a ChatGPT-shaped hole in the world’s biggest internet arena.
Among some of the more prominent deals this year, Alibaba in February led a record $1 billion round for Moonshot. Just recently, the Hangzhou-based e-commerce leader together with Tencent provided fresh funding for Moonshot’s Chinese peer Baichuan, which is valued at 20 billion yuan ($2.8 billion).
Founded in March 2023 in Shanghai, Moonshot is one of the six fast-growing Chinese AI startups that are competing to eventually become the equivalent of OpenAI in the world’s second-largest economy. Both Alibaba and Tencent have invested in the majority of the group, dubbed the “Six Little Dragons,” which include Baichuan and MiniMax.
OpenAI cut off access to its widely used development software and tools in China from July. Beijing’s requirement for any company to obtain approval before rolling out a chatbot in the country also pretty much ensures that Western companies will not be able to provide ChatGPT-like services to Chinese consumers. At the same time, Washington has moved to deny Chinese access to critical technologies including the most advanced AI chips from Nvidia Corp., citing national security concerns.
Read: OpenAI’s China Block to Reshape AI Scene as Big Players Pounce
Moonshot’s Kimi chatbot is among the ChatGPT-style tools most popular with Chinese smartphone users, along with ByteDance Ltd.’s Doubao and Baidu Inc.’s Ernie.
Founder Yang Zhilin is a serial entrepreneur with a doctorate degree in computer science from Carnegie Mellon University. He helped create Chinese enterprise software firm Recurrent AI prior to Moonshot.
China’s large language model startups are selling their services to developers at rock-bottom prices to grab market share. They are partly subsidized by cheap cloud infrastructure provided by the likes of Alibaba and Tencent, although the price war is also exacerbated by the tech behemoths competing directly with the startups.
Much of Alibaba’s investment in Moonshot came with the condition that the Shanghai-based startup needs to spend some of that money on the e-commerce platform’s cloud service, one of the people said, an arrangement also common in Silicon Valley’s generative AI scene.
--With assistance from Lulu Yilun Chen and Vlad Savov.
©2024 Bloomberg L.P.
