Chinese tech companies call for caution as ChatGPT fervour heats up, warning they are nowhere close to profitability in this field

Companies such as Beijing Deep Glint Technology, 360 Security Technology and CloudWalk are reining in expectations in the market
Some market watchers are drawing comparisons between the rally in China’s ChatGPT-driven shares and the blockchain mania which fizzled out

Artificial intelligence

Bloomberg

Published: 7:45pm, 13 Feb, 2023

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The fast and furious rally in China’s ChatGPT shares looks set to fade as tech firms caution they are nowhere close to turning a profit in this field.

Beijing Deep Glint Technology Co stumbled as much as 10.2 per cent before ending flat on Monday after the company said it does not have the capability to offer ChatGPT-linked products.

That may be a foretaste of what is to come even as firms such as Cambricon Technologies Corp and TRS Information Technology Corp jumped over 5 per cent to extend their recent gains.

Caution toward artificial intelligence-related shares is setting in after investors rushed to capitalise on what is being billed as a watershed development for the tech industry. Some market watchers are warning that the hype is not supported by fundamentals, drawing comparisons between the rally and the blockchain mania which fizzled out after a bout of heady gains.

A person uses ChatGPT, an advanced artificial intelligence chatbot developed by American tech start-up OpenAI. Photo: dpa

“In most cases it’s not immediately clear what the financial benefits are,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Apart from the companies with the strongest technical capabilities, most of the rest are probably just riding the wave. Such hype-driven rallies are never sustainable.”

Beijing Deep Glint is not the only company that is reining in expectations relating to ChatGPT. 360 Security Technology said on Friday that there is “major uncertainty” on the release date and output of such services, three days after its shares posted the biggest daily surge since November 2020.

CloudWalk, a face recognition technology developer, clarified that it has not generated any revenue from ChatGPT products and that it was not involved in any collaboration with OpenAI, the American start-up behind the popular AI chatbot.

“There looks to be a speculative element to the recent rally,” said Christina Woon, investment director for Asian equities at Abrdn. “It will be important to see how companies might be able to use this to enhance overall customer stickiness in their ecosystems or add value to their offerings, and ultimately, how this can be monetised, whether directly or indirectly.”

Traders chase ChatGPT-driven stocks from Baidu to Zhihu amid state warning

China’s onshore equity investors, especially retail players, have a track record of jumping on the latest craze even before the companies roll out marketable products.

Apart from the blockchain frenzy, traders also loaded up on shares linked to meat substitutes over three years ago despite the fact that the market barely existed in China.

Even warnings from regulators have failed to damp the ardour surrounding ChatGPT stocks.

At least three companies were queried by local stock exchanges after their shares rose more than 30 per cent over three straight sessions last week. A Chinese newspaper warned investors in a front-page commentary not to blindly join the speculative rally.

ChatGPT’s growing Chinese user base puts AI chatbot to the test

Meituan’s co-founder Wang Huiwen also waded into the discussion on Monday, with an open call for AI talent to build the Chinese version of OpenAI, according to a post on the social networking app Jike.

The entrepreneur, who left the Chinese food delivery giant in 2020, said he had invested US$50 million in the project with a valuation of US$200 million, and that the next round of fundraising had been secured at US$230 million. Wang did not immediately respond to an emailed request for comment.

In a research note, Jefferies Financial Group said a slew of Chinese players will pursue ChatGPT-related technology, but the market may not have factored in potential hurdles. These include factors such as “info accuracy is a big challenge, pricing model uncertain, and the cost of learning is high”, according to the note.

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