A Saudi Arabian fund, Prosperity7, has become the first foreign investor in China’s leading generative AI start-up, Zhipu AI. This strategic move is part of a $400 million investment round that values Zhipu AI at approximately $3 billion. Prosperity7, part of Aramco’s venture capital arm, joined this investment to support China’s bid to develop a local alternative to OpenAI.

US Restrictions and Local Funding
China’s AI sector has been reliant on domestic funding due to US-imposed restrictions. This investment marks a significant shift, with Prosperity7 becoming the first high-profile foreign backer in the Chinese generative AI scene. Zhipu AI, along with its rivals Moonshot AI, MiniMax, and 01.ai, has primarily depended on government funds and local cloud providers.

Saudi Strategy and Global Tech Landscape
Prosperity7’s involvement highlights Saudi Arabia’s ambition to foster an ecosystem that can counterbalance US dominance in AI. The US has tightened controls on investments and exports related to China’s AI sector, prompting tech giants like SoftBank and Tiger Global to step back. Conversely, Saudi Arabia’s growing influence in the Chinese tech ecosystem is evident, especially as US funds retreat.

Broader Collaboration and Future Prospects
This investment is part of a wider Saudi-Chinese collaboration, aiming to tap into new capital and customer pools. For instance, Lenovo recently issued $2 billion of convertible bonds to Saudi Arabia’s Public Investment Fund, setting up a regional headquarters and manufacturing plant in Riyadh. Other Chinese tech giants like SenseTime, Tencent Cloud, and Meituan are also expanding in Saudi Arabia.

US-Saudi Relations and Future Outlook
Despite the strategic partnership with China, Saudi investors remain mindful of their ties with the US. Amit Midha, CEO of Alat, indicated potential divestment from China if pressured by Washington, underscoring the kingdom’s commitment to building a domestic semiconductor industry in partnership with the US.

Zhipu AI’s Market Position and Future Goals
With over 800 employees in Beijing, Zhipu AI is the largest generative AI start-up in China by staff size. The company has previously received investments from Alibaba Cloud, Tencent, and Meituan, and it continues to secure support from state investors. Zhipu AI’s main product, an “AI-in-a-box” solution, enables companies to utilize its large language model with AI processors and other hardware on their premises, ensuring data protection.