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
“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.”
“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.”
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.
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.