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The search for warm artificial intelligence stocks is underway in China as local firms develop their answer to ChatGPT.
China's largest AI systems company, SenseTime, is a veteran of the technology. The latest version of its generative AI model has been updated at a rapid pace. Given its rock-bottom valuation, the corporate's lead in AI may outweigh the apparent risks weighing on its valuation.
The company unveiled the newest version of SenseNova 5.0 during its Tech Day event in Shanghai on Tuesday. The next day the share price rose greater than 30 percent. This update has significantly improved language and artistic skills. Thanks to its breakthroughs in tools for generating videos using text prompts, the tech giant may soon have a solution to Open AI's text-to-video tool Sora.
SenseTime had a lead in AI research over local competitors. The SenseNova model, launched in April last yr, was among the many first models to receive government approval for general public use. But it already had a decade of research and development and patents in AI, with a concentrate on facial recognition technology and automotive software.
Nevertheless, the share price is down 90 percent from its 2022 peak. Based on enterprise value, SenseTime trades at a multiple of around thrice forward sales, i.e. just 1 / 4 of world competitors.
This high discount reflects geopolitical risks on account of US-China tensions. The U.S. blacklisted SenseTime in 2019 over allegations related to human rights abuses in Xinjiang and later banned U.S. investments in SenseTime securities, which may hinder investments from other countries. It has denied the allegations.
The audit presents latest challenges for SenseTime because it expands into some overseas markets. However, as Beijing focuses on boosting investment within the local AI industry, SenseTime could discover a larger market at home.
Compared to generative AI startups, SenseTime's diversified revenue base is a bonus. Training and running large language models is pricey. The majority of SenseTime's revenue comes from software licensing fees, cloud services and pre-installed products sold to automakers. Its smart automobile platform is already within the cars of 30 automobile manufacturers. SenseTime has the most important market share in automotive image recognition systems in China.
As a result, SenseTime's generative AI segment, which tripled in size last yr and accounted for greater than a 3rd of group revenue, receives some revenue support from the group's other businesses. Its backers include local e-commerce giant Alibaba and major state-owned firms.
It's still too early to choose firms that would dominate China's generative AI market. But with valuations so low, SenseTime offers a low-risk bet on a possible winner.
