Analyst Says Generative AI 'Much Further Out' In China After Alibaba Unveils ChatGPT Rival

A management analyst said that unlike in the United States where generative artificial intelligence (AI) is making headway, it could be "much further out" in China due to regulatory hurdles, even after the Chinese e-commerce giant unveiled Tuesday its own version of OpenAI-developed AI chatbot ChatGPT.

"Definitely separate U.S.-based AI versus China-based AI. When we're looking at China, that's probably much further out when we start to see this materialize," said Adam Coons, portfolio manager at investment advisory firm Winthrop Capital Management, in an interview with CNBC's "Street Signs" published Tuesday.

His statement came after he was asked about whether he thinks generative AI will build momentum in China, as it has in the United States, after Alibaba unveiled Tongyi Qianwen, an AI model that could rival the Microsoft-backed ChatGPT.

On whether Chinese firms capitalizing on generative AI can make positive predictions about how the technology will be turned into revenue, Coons said that "it's probably too soon to tell where the Chinese companies [are]." He went on to explain that in the United States, there's more insight into how generative AI like ChatGPT can be monetized. But when it comes to China, Coons believes it would "take some time to see how the CCP (Chinese Communist Party) deals with this" as regulatory hurdles could still emerge along the way.

Coons clarified that while the Chinese government did seem to "step back with some of the harshest in the regulatory environment," he would still "be cautious" in terms of investing in Chinese generative AI "as a large revenue-generator here in the short term."

Coons' comments came on the same day Alibaba unveiled its AI large language model called Tongyi Qianwen that the e-commerce company said would be integrated into all of its apps in the future.

In a filmed demonstration that showed the AI model's capabilities, Tongyi Qianwen planned travel itineraries and also advised shoppers on which types of makeup would fit their preferences, Reuters reported.

The model, which will first be deployed on Alibaba's workplace communication software DingTalk, will have Chinese and English language capabilities, as per CNBC. It will also be initially rolled out for smart home appliances provider Tmall Genie before it is deployed in Alibaba's other apps.

The Jack Ma-founded company also said that Chinese developers can apply for beta testing of the AI model to create their AI applications.

"We are at a technological watershed moment driven by generative AI and cloud computing, and businesses across all sectors have started to embrace intelligence transformation to stay ahead of the game," chairman and CEO of Alibaba Group Daniel Zhang said in a statement.

Hours after Alibaba's unveiling of Tongyi Qianwen, China's cyberspace regulator the Cyberspace Administration of China published a draft regulation that looks to "regulate the use of generative AI technology and promote its healthy development," the state-affiliated newspaper China Daily reported.

The 21-article draft has been opened for public opinion and suggestions on the proposed regulation will be accepted until May 10. According to China Daily, the proposed rule "underscores that content generated by AI must not subvert State power, incite overthrowing the socialist system, secession or the destruction of national unity."

The regulator also said that companies seeking to capitalize on generative AI products will undergo "security assessment."

In December, the internet regulator passed a regulation on technology that makes use of deep learning, virtual reality "and other synthesis algorithms to generate text, images, audio, video, and virtual scenes."

The said regulation prohibits the use of generative AI to engage in any activities that may pose a risk to national security or damage public interest, as per TechCrunch. Furthermore, the regulation requires platforms to ask for permission before they alter faces and voices for deep learning as well as other identification and infringement-related clauses.

ChatGPT was not launched in China even as Chinese firms rushed to integrate tech into their products. Chinese users are not allowed to create OpenAI accounts to access the chatbot, but several virtual private networks and foreign phone numbers have helped some curious users get through restrictions, as per Reuters.

The Chinese government, in response to the growing interest in the chatbot, has banned hosting proxy ChatGPT services on the multi-service platform WeChat.

While Alibaba and several other Chinese firms such as Baidu continue to work on generative AI, observers noted that China has made it clear while it is also betting on the AI rush, it would only bet on companies that it could control.