The Chinese AI industry is seeing increasingly muted investment as the hype in 2018 begins to dissipate, according to a report published today, with some fearing an AI winter in the country.

Next 10 Years: What To Expect In China’s Artificial Intelligence Future, published by the China Money Network, found that while the number of deals in 2018 totalled 496, with a combined value of $15.7bn, the first half of 2019 has been significantly more cautious. In the first six months of this year there have been just 131 deals, with a combined value of $5.6bn.

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“Investment [in 2018 was] booming in this industry. AI players in China doubled or tripled their staff members within one year. The investors paid a lot more attention to this industry and they [were] really optimistic,” said Nina Xiang Ji, managing editor, China Money Network, in a panel at the World Economic Forum’s Annual Meeting of the New Champions held today in Dalian, China.

“By 2019 you could see that the sentiment is changing. The investors are getting more and more rational and cautious, and the valuation of those startups is more reasonable.”

Long term prospects remain positive for Chinese AI industry

Despite the current dip in investments, China Money Network, which surveyed a host of experts within the country, found that the long-term outlook still remains very positive for the Chinese AI industry – despite what it calls “whispers of an AI winter”.

“All these experts have rosy pictures for the long-term outlook and they are confident. For the near term, you could see some ups or downs, or downregulating, but in the long term they are confident,” said Xiang Ji.

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Some have even predicted AI becoming the dominant revenue source for Chinese companies.

“I expect that in three to five years, the proportion of Chinese companies’ annual revenue that are driven by AI will exceed 50%,” said Wenyuan Dai, founder of 4Paradigm, who contributed to the report.

There is also expected to be significant development in terms of the capabilities of AI, which is expected to help fuel the longer term growth of the Chinese AI industry.

“A lot more experts tell us that we’ve hit the tip of the iceberg in the applications. You are just scratching the surface, and this is really an early stage for the application of AI,” said Xiang Ji.

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