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China’s Rush to Dominate A.I. Comes With a Twist: It Depends on U.S. Technology

China’s Rush to Dominate A.I. Comes With a Twist: It Depends on U.S. Technology

China’s tech firms were caught off guard by breakthroughs in generative artificial intelligence. Beijing’s regulations and a sagging economy aren’t helping.

In November, a year after ChatGPT’s release, a relatively unknown Chinese start-up leaped to the top of a leaderboard that judged the abilities of open-source artificial intelligence systems.

The Chinese firm, 01.AI, was only eight months old but had deep-pocketed backers and a $1 billion valuation and was founded by a well-known investor and technologist, Kai-Fu Lee. In interviews, Mr. Lee presented his A.I. system as an alternative to options like Meta’s generative A.I. model, called LLaMA.

There was just one twist: Some of the technology in 01.AI’s system came from LLaMA. Mr. Lee’s start-up then built on Meta’s technology, training its system with new data to make it more powerful.

The situation is emblematic of a reality that many in China openly admit. Even as the country races to build generative A.I., Chinese companies are relying almost entirely on underlying systems from the United States. China now lags the United States in generative A.I. by at least a year and may be falling further behind, according to more than a dozen tech industry insiders and leading engineers, setting the stage for a new phase in the cutthroat technological competition between the two nations that some have likened to a cold war.

“Chinese companies are under tremendous pressure to keep abreast of U.S. innovations,” said Chris Nicholson, an investor with the venture capital firm Page One Ventures who focuses on A.I. technologies. The release of ChatGPT was “yet another Sputnik moment that China felt it had to respond to.”

Jenny Xiao, a partner at Leonis Capital, an investment firm that focuses on A.I.-powered companies, said the A.I. models that Chinese companies build from scratch “aren’t very good,” leading to many Chinese firms often using “fine-tuned versions of Western models.” She estimated China was two to three years behind the United States in generative A.I. developments.

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