China’s OpenAI rival backed by Saudi fund

Aleksei Gorodenkov/Alamy via Reuters

• Aramco fund invests in Zhipu AI
• China wants to rival OpenAI
• US dominates the market

Saudi Aramco’s venture capital fund Prosperity7 has joined a $400 million investment round for Chinese generative AI startup Zhipu AI.

Prosperity7 is a minority investor in Zhipu, which is valued at nearly $3 billion, the Financial Times reported on Friday.

This marks the first instance of foreign investment in China’s quest to establish a homegrown rival to OpenAI.

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It also reinforces Saudi Arabia’s intention to diversify AI ecosystems away from US dominance.

US restrictions on the AI sector and tightened export controls on high-end chips used in AI models mean that Chinese startups, including Zhipu, are seeking support from foreign investors.

Zhipu AI, the largest Chinese generative AI startup by number of staff, has primarily relied on domestic funding so far.

Geopolitical tensions have intensified competition over tech, prompting Washington to restrict China’s access to semiconductors.

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The US has also pressured nations to refrain from backing China’s tech sector via investments or exports.

Sales of chips are already curtailed in China and Russia, but last year the Biden administration also blocked sales of some of Nvidia’s most valuable products to the Middle East to block potential re-export.

Abu Dhabi’s G42, which is leading the UAE’s charge into AI and associated technologies, has sought to distance itself from China, thought to be a prerequisite for securing a $1.5 billion investment from Microsoft.

But Peng Xiao, G42’s CEO, said earlier this year that severing ties was “difficult”.

Despite these tensions collaboration between Saudi Arabia and China continues to flourish beyond AI and the tech sector, fuelled by mutual interests in innovation and economic development.

Lenovo recently announced a $2 billion issuance of convertible bonds to a Saudi subsidiary in exchange for establishing its regional headquarters in Riyadh and setting up a manufacturing plant in the kingdom. 

Meanwhile, Alphabet’s augmented reality startup Magic Leap, majority owned by Saudi Arabia’s Public Investment Fund, said in a blog post it is forming a partnership with Google.

The deal with the AI headset maker could drive Google’s return to the AR/VR device market, which has been largely dominated by Apple and Meta so far.