Faisal Bashir | Light Rocket | Getty Images
BEIJING — China’s artificial intelligence model may be rapidly gaining traction, but it’s not yet translated into revenue, raising questions about company valuations.
Estimates released Thursday by US-based research firm Rhodium Group said that all of China’s AI models combined only generate about 10% of the revenue reported by OpenAI and Anthropic. This is based on a report using an industry metric called annual recurring revenue, which attempts to capture rapid growth by multiplying recent monthly numbers by 12.
According to Rhodium’s report, DeepSeek’s ARR was the lowest among major Chinese AI companies at $500 million. MiniMax was next at $800 million, followed by Moonshot at $1 billion.
Z.ai told investors on Wednesday that its latest ARR was $1.8 billion, according to records obtained by CNBC.
But ByteDance’s $4 billion and Alibaba’s $2.4 billion combined remain far lower than the $40 billion generated by OpenAI alone, not to mention Anthropic’s $65 billion, Rhodium said.
Importantly, low earnings have not quite kept up with investors’ valuations of Chinese startups.
“Revenue valuations for Moonshot and Deep Seek appear to be prohibitively high at this time,” Rhodium’s report said. Analysts pointed to estimated ratios of 50x and 163x for the two startups, respectively.
This is significantly higher than OpenAI’s 34x and Anthropic’s 21x, the report said.
Z.ai forecast
Indeed, the Rhodium analysis is likely to refer only to the latest numbers available this summer, and China’s use of AI models has surged from low levels earlier this year.
Z.ai announced on Wednesday that it expects ARR to reach $3 billion by the end of the year, up from previously expected $2.4 billion.
Rhodium also noted that Chinese AI research institutes are exploring ways to earn more revenue from third parties that provide access to their models. The open source nature of the model means that anyone with sufficiently capable hardware can download and run it, independent of the developer.
U.S. models are mostly closed, and leading AI models from OpenAI and Anthropic have a much higher cost per task than Chinese models, according to AI comparison firm Artificial Analysis.
“The funding gap means it will be much harder for China’s frontier AI labs to scale sustainably,” Logan Wright, a partner at Rhodium Group, said in a statement to CNBC. He co-authored the report with research analyst Endeavor Tian.
“A lot will depend on a good environment in the stock market. Historically, that’s not an easy bet in China,” he said. “Government funding has been helpful on the hardware side of increasing computing power, but we would be hesitant to directly fund Frontier Laboratories as well.”
Rhodium estimated that more than 60% of China’s equity investment in AI chips and servers comes from state-affiliated sources.
It’s been a volatile year for listed Chinese AI companies.
Z.ai shares rose more than 5% in Thursday morning trading, recovering from losses earlier this week following news of its second major funding in two months. The Hong Kong-traded stock more than tripled in value at one point in the summer, before falling back to spring levels.
Rival MiniMax’s stock has struggled to outpace its IPO day gains in recent months after its stock soared in the spring.
—CNBC’s Jenny Lee contributed to this report.
