Saudi Aramco-owned Prosperity7 venture capital invests $400 mn in Chinese AI firm Zhipu

Despite its concerted efforts, the United States has seemingly been unable to prevent Prosperity7, the venture capital arm of Saudi Arabia’s state-owned oil conglomerate Aramco, from investing in China’s AI sector. Prosperity7 has become the sole foreign investor in China’s leading generative artificial intelligence start-up, supporting the nation’s initiative to develop a domestic competitor to OpenAI.

As reported by the Financial Times, Prosperity7 joined a significant $400 million funding round for the AI start-up Zhipu AI. This investment values the Chinese company at approximately $3 billion.

Zhipu AI is the largest Chinese generative AI start-up in terms of workforce employing over 800 people at its headquarters in Beijing’s Haidian district. It has previously secured funding from major tech firms such as Alibaba Cloud, Tencent and Meituan, and enjoys backing from state investors, including the National Social Security Fund.

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The company’s core offering is an “AI-in-a-box” product, which allows businesses to utilise its large language model with AI processors and other hardware on-site ensuring enhanced data security.

AI charms Prosperity7

This isn’t Prosperity7’s first foray into the Chinese AI sector. Earlier this year, under pressure from the Biden administration, the venture capital fund was compelled to divest its shares in Rain AI, a chip startup backed by OpenAI CEO Sam Altman, according to a report by Bloomberg. Prosperity7 had to exit its investment in the company, which is known for its chip design capabilities and association with Altman.

Besides Zhipu AI, China is home to other notable AI startups, including Moonshot AI, MiniMax and 01.ai. Prosperity7’s involvement marks the first significant instance of a foreign investor supporting one of these leading Chinese AI companies.

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Given that Prosperity7 is part of the Saudi-owned Aramco, it’s reasonable to infer that this investment has the endorsement of the Saudi Kingdom. Saudi Aramco is largely government-owned, with the Saudi Arabian government holding 98.2 per cent of the shares and the country’s sovereign wealth fund, the Public Investment Fund (PIF), owning 4 per cent.

The birth of Prosperity7

Launched on 1 February, 2022, Prosperity7 manages a $3 billion fund to foster the growth of cutting-edge technologies and innovative business models globally. As a venture capital arm with a long-term perspective, Prosperity7 is committed to driving prosperity and positively impacting on a broad scale. According to Aramco, Prosperity7 backs visionary entrepreneurs building transformative companies addressing some of the world’s most critical challenges. The fund emphasises creating enduring partnerships, offering quality mentorship and providing access to a vast network of leading companies, venture capital firms and industry experts worldwide.

Prosperity7 investment portfolio spans early-stage enterprises, blockchain, financial and industrial technologies, healthcare, and education solutions. Based in Dhahran, the fund comes from Dammam Well-7, the first commercially viable oil well in Saudi Arabia, known as the ‘Prosperity Well’.

US wary of China’s AI forays

Last year, the United States banned investments in China’s artificial intelligence sector, affecting major global tech investors like SoftBank and Tiger Global. These restrictions have significantly impacted China’s AI industry, making Prosperity7’s recent investment particularly timely and beneficial.

As reported by the Financial Times, Lenovo, the Chinese PC manufacturer, issued $2 billion in convertible bonds to Alat, a subsidiary of Saudi Arabia’s PIF. In return, Lenovo plans to establish its regional headquarters in Riyadh and construct a manufacturing plant in Saudi Arabia. Companies like SenseTime, Tencent Cloud and Meituan are also expanding their presence in the kingdom.

China’s rising footprint in AI domain

Earlier this week, China unveiled a three-year action plan to enhance standards in cutting-edge technologies, including artificial intelligence. This initiative, outlined in an official statement, was collaboratively issued by the Central Cyberspace Affairs Commission, the State Administration for Market Regulation and the Ministry of Industry and Information Technology.

The plan mandates Chinese experts and institutions to develop standardized protocols in several advanced technology domains such as generative AI, blockchain, cloud computing, quantum information, brain-computer interfaces, next-generation internet and the metaverse.

This standardisation effort aims to “drive technological and economic development and boost international influence.”

A report from BlueWeave Consulting in February highlighted that China’s AI market was valued at $29.02 billion in 2023. The report projects that from 2024 to 2029, the market will expand at an annual growth rate of 20.12 per cent, reaching an estimated $104.7 billion by 2030.

This rapid growth in AI research and development is cementing China’s status as a global leader in AI innovation. As China continues to dominate the AI landscape, the market’s expansion provides significant opportunities for businesses and investors in this rapidly evolving field.