Chinese Zhipu AI Secures $400M from Saudi’s Prosperity7 Ventures, Aims to Compete with OpenAI

Microsoft-backed OpenAI’s rival in China, Zhipu AI, has secured a foreign investment from Saudi Arabia’s Prosperity7 Ventures, part of Aramco’s venture capital arm. Prosperity7’s $400 million investment values the Beijing-based startup at approximately $3 billion, making it the first notable foreign backer for one of China’s leading generative AI companies.

Prosperity7 Ventures is the sole foreign investor in Zhipu AI, aligning with China’s efforts to establish a competitor to OpenAI. This financing round is crucial for Zhipu AI for its growing influence and potential in the AI industry.

Founded in 2019, Zhipu AI is one of China’s earliest and most prominent startups developing generative artificial intelligence, aiming to compete with established players like OpenAI and Google. The startup, which received government approval for a public rollout in its initial phase, has support from key players in the Chinese tech industry, including Alibaba Group Holding Ltd and Tencent Holdings Ltd. 

Zhipu AI, alongside Moonshot AI, MiniMax, and 01.ai, has historically received backing from government funds and local cloud providers, according to a report by the Financial Times. 

The recent investment by Prosperity7 in Zhipu AI’s funding round shows its plans to reduce dependency on Silicon Valley’s dominance in the AI sector. This move is important given the investment’s geopolitical importance, particularly amid heightened tensions between the US and China over AI technology.

Prosperity7, a subsidiary of the state-owned oil company Saudi Aramco, joined Zhipu AI’s latest funding round as a minority investor, as per the report. While Zhipu AI is China’s largest generative AI startup in terms of staff size, it has previously relied on local investment and government support due to increased US restrictions. Previous investors include Alibaba Cloud and Tencent, along with support from state-backed entities like the National Social Security Fund.

The US has imposed several restrictions targeting China’s AI development, including limiting access to advanced AI chips and prohibiting certain US investments in the sector. In response, China has intensified efforts to develop domestic options to technologies like ChatGPT, recognizing AI’s crucial role in future economies. The investment from Prosperity7 coincides with growing scrutiny in the US over the activities of Middle Eastern wealth funds. 

Foreign investment presents an opportunity for Zhipu AI to expand into new markets beyond China, where enterprise service payments are typically modest. Moreover, with  such investments, Saudi Arabia plans to impose stringent requirements on technology deals. This was evident in recent agreements such as Lenovo’s $2 billion convertible bonds issue to Alat, a subsidiary of Saudi Arabia’s Public Investment Fund. 

In response to these developments, companies like TikTok owner ByteDance have been instructed to reduce spending on foreign-made chips, particularly those from Nvidia. 

The recent halt in US AI chip exports to the Middle East, citing national security concerns, has wider repercussions on companies like Nvidia Corp and Advanced Micro Devices Inc., affecting their recovery from the loss of the Chinese market.

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