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US-Blacklisted Zhipu AI Secures Fresh Funding from Chinese State Firm

Zhipu AI, a Chinese AI startup, has secured 500 million yuan ($69.04 million) in funding from Huafa Group, a state-owned conglomerate based in Zhuhai, Guangdong province. This follows the company’s earlier announcement in January of a separate 1 billion yuan capital raise. Huafa Group’s investment comes amid competition between Chinese cities to back promising AI startups, as Beijing views this sector as vital to its technological rivalry with the United States, according to Zhuhai Special Economic Zone Daily.

Earlier this month, Hangzhou City Investment Group Industrial Fund, a state-backed entity from Hangzhou, also participated in a major funding round for DeepSeek, a competitor of Zhipu AI, securing 1 billion yuan. This aligns with China’s push to strengthen its AI capabilities, as DeepSeek‘s large language models have gained attention for allegedly matching the performance of Western counterparts at lower development costs.

Founded in 2019, Zhipu AI is widely recognized as one of China’s “AI tigers”. The startup has drawn investments from prominent tech giants such as Tencent, Meituan, and Xiaomi, across over 15 funding rounds, according to business registration platform Qichacha. In July 2024, Zhipu AI was valued at 20 billion yuan.

The latest funds will be directed toward advancing the development of its GLM foundation model and furthering the company’s technological innovation and ecosystem expansion. However, this investment comes after Zhipu AI and its subsidiaries were added to the U.S. Commerce Department’s export control entity list in January, which prevents the company from procuring U.S.-made components.

Apple Partners with Alibaba to Introduce AI Features for iPhones in China

Apple has partnered with Alibaba to launch artificial intelligence features for iPhone users in China, a move aimed at addressing months of uncertainty over Apple’s AI strategy in the region, according to The Information. The collaboration could help Apple regain its competitive edge in the Chinese market, where it has been losing ground to local rivals such as Huawei, which has already incorporated AI tools into its smartphones since last year.

Apple’s stock rose by 1.5% following the news, while Alibaba’s U.S.-listed shares saw a 2.6% gain. Apple had initially chosen Baidu as its AI partner, but the Chinese company’s progress in developing models for Apple Intelligence did not meet Apple’s standards. As a result, Apple considered various other AI models from Tencent, ByteDance, Alibaba, and Deepseek but ultimately chose Alibaba for its ability to leverage vast amounts of user data related to shopping and payment habits, which could enhance model training and enable more personalized services.

The Chinese AI features co-developed by Apple and Alibaba are now under review by China’s cyberspace regulator for approval. This development is crucial as Apple’s iPhone sales declined during the holiday quarter, typically its best-performing period, largely due to the absence of AI features in its latest devices. Apple remains optimistic, forecasting strong sales growth for the current quarter.

Chinese Companies Embrace DeepSeek’s AI Amid Growing Frenzy

Chinese companies, including Great Wall Motor and major telecom providers, are quickly integrating the AI model released by DeepSeek, capitalizing on its attention and breakthroughs. Great Wall Motor, China’s first listed automaker, confirmed that it had embedded DeepSeek’s AI into its connected vehicle system, branded “Coffee Intelligence.” This integration marks a significant shift as the company seeks to enhance its technological offerings.

Meanwhile, China’s Ministry of Industry and Information Technology (MIIT) announced that the country’s three largest telecom operators—China Mobile, China Unicom, and China Telecom—are collaborating with DeepSeek to promote the inclusive application of AI technology. This move is part of a larger trend as companies rush to incorporate the model into their products.

DeepSeek’s AI platform has sparked investor interest, fueling speculation about its disruptive potential across China’s tech sector. Stocks of Chinese companies tied to AI, including chipmakers, software developers, and data center operators, have surged in response to this new development. Capitalonline Data Service and MeiG Smart Technology, two listed companies, experienced significant stock price jumps after announcing their integration of DeepSeek’s AI. However, both firms have cautioned investors, stating that the impact on their future business performance remains uncertain.

Other industry giants like Tencent and Huawei have also joined the wave, revealing they have integrated DeepSeek’s model into their own offerings. The rapid adoption highlights the growing impact of DeepSeek’s AI on China’s tech landscape.