Recently, the 54th “Statistical Report on China’s Internet Development” was released. In the first half of the year, generative artificial intelligence (AI) continued to be a global technology hotspot, and China’s AI industry has gradually entered a period of fast development. “AI+” continues to empower industrial upgrading, contributing to the acceleration of new productivity development and the deep advancement of new industrialization.

Data shows that the market size of China’s core AI industry has approached CNY 600 billion, with more than 4,500 AI companies, and the computing power ranks second globally.

On September 8, Vice Minister and Deputy China International Trade Representative Ling Ji explained that Chinese AI companies account for about 1/7 of the global total.

Meanwhile, AI products have gained significant recognition and use among China’s vast internet user base. The report surveyed the usage of generative AI products, showing that by June 2024, the penetration rate of AI, particularly large models, reached 16.4%.

Moreover, the “National Artificial Intelligence Industry Comprehensive Standardization System Construction Guide (2024 Edition)” , jointly issued by the Ministry of Industry and Information Technology, the Office of the Central Cyberspace Affairs Commission, the National Development and Reform Commission, and the State Administration for Market Regulation, was officially released.

The guide is regarded as a key document for the formation of China’s standard system to drive the development of the AI industry.

The guide points out that by 2026, the level of integration between standards and technological innovation in the industry will continue to improve, with more than 50 new national and industry standards being developed, accelerating the formation of a standard system that promotes the high-quality development of the AI industry.

More than 1,000 companies will participate in the promotion and implementation of these standards, with the effect of standards on corporate innovation becoming more prominent. China will also participate in the development of more than 20 international standards, promoting the globalization of the AI industry.

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The Wall Street Journal reported that OpenAI is in talks for a new round of funding, with tech giants Apple and NVIDIA both interested in investing in the AI research company OpenAI.

It’s reported that this investment will be part of OpenAI’s new round of financing, which will bring its estimated value to exceed USD 100 billion.

Sources indicated that OpenAI plans to raise billions of dollars, and venture capital firm Thrive Capital will lead this round of funding with a USD 1 billion investment. Microsoft, OpenAI’s largest shareholder, will also be a part of this round.

Reportedly, sources have revealed that Apple is currently in talks with OpenAI for the potential investment, while NVIDIA has already discussed joining the latest round of funding, who reportedly considered investing USD 100 million.

Although it is not yet clear how much Apple and Microsoft plan to invest, the point is that the three most valuable tech giants in the world would all become shareholders of OpenAI if these negotiations end in success.

In a memo on Wednesday, OpenAI’s CFO Sarah Friar stated that the company is seeking new financing but did not disclose specific details. Friar mentioned that OpenAI would leverage this funding to strengthen computing power and cover other operational expenses.

With the rise of the AI industry, Microsoft, Apple, and NVIDIA have also accelerated their pace in developing AI technologies.

Microsoft has invested USD 13 billion in OpenAI since 2019, holding a stake of 49% in this company. Apple, at its Worldwide Developers Conference (WWDC) in June this year, launched the Apple Intelligence system and announced a partnership with OpenAI.

As for NVIDIA, it has long been closely collaborating with OpenAI and has been highly active in making investment in this field. Its investment arm, NVentures, has invested in several AI companies since 2023.

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• [News] NVIDIA’s Q3 Forecast Fails to Impress, while It Claims Blackwell to Bring Several Billion Dollars Revenue in Q4
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AI chip NVIDIA provided financial guidance for the third quarter, estimating its quarterly revenue to reach USD 32.5 billion, with a fluctuation of plus or minus 2%. The figure, though beats market expectations in general, still falls short of the market’s most optimistic forecast of USD 37.9 billion, sparking concerns that its explosive growth is waning.

On the other hand, regarding whether NVIDIA’s next-gen AI chip, Blackwell, faces delay, the tech giant notes that it shipped samples this quarter, and has made an adjustment to the product to make it more efficient to manufacture, according to a report by CNBC.

Citing CFO Colette Kress, the report states that in the fourth quarter, “we expect to ship several billion dollars in Blackwell revenue.”

Q3 Guidance Somehow Fails to Impress the Market

According to NVIDIA’s guidance, the adjusted gross margin in the third quarter is expected to be 75%, with a fluctuation of plus or minus 50 basis points, slightly below the market expectation of 75.5%. The company’s gross margin for the second quarter was 75.7%, with an average expectation of 75.8%.

This quarter’s outlook, though being solid, somehow fails to impress the market. The AI chip manufacturer has been a major beneficiary as companies rush to upgrade their data centers to handle AI software, and its sales forecast has become a barometer of this AI surge.

A report by the Economic Daily raises concerns that though the company has had several consecutive quarters of outstanding performance, most of its growth comes from a small number of customers. For instance, about 40% of its revenue comes from large data center operators, such as Google and Meta.

Although these tech giants have been investing heavily on AI, there are concerns that the scale of the infrastructure being built may exceed current demand, which could lead to a bubble.

Blackwell Update: Obstacles Removed?

There were concerns that there might be design issues with Blackwell, which might cause the shipment to delay. According to the report by the Economic Daily, NVIDIA admitted that it has encountered difficulties in the production process, but stated that they are implementing reforms to improve yield rates.

A report by Wccftech states that NVIDIA has confirmed that it has “implemented a change” to the Blackwell GPU mask produced at TSMC using the 4NP process node, which is expected to further enhance production yield. As this change is not a significant architectural redesign, the product remains on schedule for the ramp to start in the fourth quarter and continuing into FY2026.

According to Wccftech, NVIDIA CEO Jensen Huang reiterates that “Hopper demand remains strong, and the anticipation for Blackwell is incredible.” CFO Colette Kress further states that in the fourth quarter, “we expect to ship several billion dollars in Blackwell revenue.”

Q2 Performance Still Beats Market Expectations

In the second quarter, which ended on July 28, NVIDIA’s revenue was USD 30.04 billion, surpassing the market expectation of USD 28.7 billion. The annual growth rate for this quarter was 122%, marking the third consecutive quarter with a growth rate exceeding 200%. Net income for the quarter more than doubled from USD 6.18 billion, or 25 cents per share, a year ago to USD 16.6 billion, or 67 cents per share. Adjusted earnings per share were 68 cents, beating the market expectation of 64 cents.

It is worth noting that NVIDIA’s data center business revenue in the second quarter increased significantly by 154% YoY to $USD 26.3 billion, accounting for 88% of total sales. Its gaming revenue also grew 16% year over year to USD 2.9 billion, exceeding the expected USD 2.7 billion, which the company attributes to an increase in shipments of PC gaming cards and game console SoCs, reportedly chips for Nintendo’s game consoles.

The company also announced the approval of a USD 50 billion share buyback program.

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As global competition heats up in the AI sector, an emerging power has now joining the battlefield. Ola, an automotive manufacturer in India, plans to launch the country’s first in-house AI chip by 2026, which is based on ARM architecture, according to a report by Wccftech.

Though there are more details yet to be revealed, the report notes that Ola did highlight its key chip offerings, featuring the Bodhi series, which would be the nation’s first self-developed AI chips. The company’s product lineup also reportedly includes the Sarv-1 cloud-native CPUs and the Ojas edge AI chip.

When asked about the potential foundry partners in the future, Ola’s CEO Bhavish Aggarwal mentioned that the company plans to collaborate with a global tier I or II foundry, likely TSMC or Samsung, according to the report.

Ola’s AI lineup is expected to start with the Bodhi-1 AI chip, which is specifically designed for large-scale LLMs, with a focus on inferencing workloads, Wccftech suggests. Positioned as a low-to-mid-tier offering from Ola, the chip is said to be launched by 2026, followed by a more potent successor, the Bodhi-2, slated to be released in 2028.

According to Wccftech, it is worth noting that Ola also introduced an edge AI chip named Ojas, which is likely to be integrated into Ola’s next-generation electric vehicles. In addition, the Sarv-1, specifically designed for cloud computing, is expected to feature ARM Neoverse N3 cores, though this hasn’t been confirmed yet, the report states.

As the world’s fifth largest economy, India seems to be relatively slow in developing its own AI chips. China, the world’s largest developing country, has quite a long history in developing in-house AI chips.

Chinese tech giant Huawei is said to be testing its latest processor, the “Ascend 910C,” with internet companies and telecom operators recently. Reportedly, the company has informed potential customers that this new chip is comparable to NVIDIA’s H100 GPU, which cannot be directly sold in China.

On the other hand, Baidu’s foray into AI chips can be traced back to as early as 2011. After seven years of development, Baidu officially unveiled its self-developed AI chip, Kunlun 1, in 2018. T-Head, owned by Alibaba, introduced its first high-performance AI inference chip, the HanGuang 800, in September 2019.

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Is the AI bubble about to burst? Two years after OpenAI launched ChatGPT, sparkling a surge in generative AI startups, China has now seen a wave of closures on AI companies. According to a report by Commercial Times, citing Chinese media TMTPost, nearly 80,000 AI companies in China have registered and then either closed down or suspended operations within the past 600 days.

The reports note that according to the data from the National Enterprise Credit Information Publicity System of China, between November 30, 2022, the release date of ChatGPT, and July 29, 2024, a total of 78,612 AI-related companies in China, which were newly registered during this period, are now in a deregistered or abnormal business status. This accounts for 8.9% of the 878,000 AI companies registered during the same period.

The current adversity for the AI companies in China, the reports suggest, could be attributed to excessive spendings regarding high computational costs and R&D investments, declines in venture capital leading to a funding freeze, and difficulties in achieving profitability.

According to the reports, over the past three years, more than 200,000 AI-related companies in China have been deregistered or revoked, with a total of 353,000 AI-related companies disappearing within the past decade.

On the other hand, as of August 7th, there are said to be 300,700 new AI companies registered in 2024. Currently, there are 1,804,300 AI-related companies in existence in China, the reports state.

Among them, over 4,500 companies are officially recognized as part of the AI industry system. More than 180 large generative AI models, which have completed registration and be online to provide public services, have been developed, with a registered user base exceeding 564 million.

Wang Xiaochuan, founder of Chinese search engine company Sogou, once stated in 2023 that the Large Language Model (LLM) for AI would undergo an “elimination tournament” in China, with the top tier likely consisting of no more than five companies, according to a report on Soho.

Baidu CEO Robin Li also mentioned in July that China has too many large language models, calling for tech leaders to focus more on building real-world applications driven by AI. A report by South China Morning Post, quoting Li, said that since the launch of ChatGPT in late 2022, China’s generative AI market has become crowded with over 200 large language models.

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