Growth Dragons Weekly: Kuaishou Kling AI Impresses, Tariffs and Consumer Weakness Continue to Plague China, But Hong Kong IPOs Warming Up
What happened in China this week:
Kuaishou’s Kling Video Generation Capability Rivals OpenAI’s Sora + China’s Cloud Price War
Many Tariffs Are Raised Against China But Are They Effective?
China Government Needs to Stimulate More As Private Consumption Remains Weak
Minieye and Black Sesame Set to IPO While QuantumPharm Jumps on IPO Day
#1 Kuaishou’s Kling Video Generation Capability Rivals OpenAI’s Sora + China’s Cloud Price War
Chinese companies have been highly proactive in integrating AI into their business operations. Many have stockpiled semiconductor chips and equipment to sustain their AI development for the next year or two. Recently, some Chinese companies have achieved notable advancements.
Kuaishou, a prominent Chinese company, has introduced Kling AI, a rival to OpenAI’s Sora, capable of generating videos from text. Kuaishou, which competes with Douyin in the short-video market, launched Kling AI to convert text into video clips up to 2 minutes long with 1080p resolution. Additionally, Zhipu AI, another leading generative AI startup in China, plans to release a model competing with Sora. Kling AI is the latest innovation from Kuaishou, following its KwaiYii large language model and Kolors text-to-image model. Below is a clip comparing a Kling AI-generated video with Sora’s output, showcasing Kling AI’s impressive capabilities:
Kuaishou’s core short-video business boasts nearly 400 million daily active users, trailing Douyin’s 600 million. This quarter, Kuaishou turned a profit with 4.12 billion yuan in revenue, primarily driven by online marketing services and e-commerce. Despite trailing Douyin, Kuaishou’s fundamentals are improving.
To support the growing AI demands, cloud infrastructure must be expanded. Companies like Alibaba are slashing prices on their AI models and cloud services. ByteDance has significantly reduced prices for its Doubao Large Language Model, contributing to a competitive AI landscape in China. Currently, the Chinese AI market is experiencing a price war, with businesses striving to capture more market share through aggressive pricing.
Despite these efforts, cloud businesses are not expected to generate significant revenue or profits. This is evident from Baidu’s slow monetization of its AI model, where only 6.9% of its revenue is linked to AI models and generative AI services. According to IDC, the growth rate of China’s corporate client-focused cloud market slowed to 9.5% in H2 2023 from 15.9% in H1 2023. IDC’s rankings for infrastructure-as-a-service (IaaS) show Alibaba Cloud leading with 27.1%, followed by Huawei Cloud at 13.5%, China Telecom Corp’s cloud business at 8.7%, and Tencent Cloud at 8.65%.
However, Chinese businesses have yet to achieve strong revenue growth in their AI domains compared to their U.S. counterparts. They face challenges in increasing subscriptions from business and individual users. In contrast, U.S. companies like Microsoft have successfully integrated their AI chatbot Copilot into GitHub, Bing, Office software, and other packages, generating substantial income. GitHub Copilot subscriptions increased by 35%, reaching 1.8 million subscribers from the previous quarter. Chinese businesses struggle to scale globally due to technological barriers, but the domestic market offers ample opportunities. Occasionally, a breakthrough technology like Kling AI can achieve worldwide virality, providing a significant advantage.
#2 Many Tariffs Are Raised Against China But Are They Effective?
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