For Chinese AI start-ups, foreign investments such as these are crucial for accessing new markets. Credit: GamePixel/Shutterstock.com.

Saudi Arabia’s Prosperity7 Ventures has made an undisclosed investment in China-based Zhipu AI, valuing the generative artificial intelligence (AI) startup at approximately $3bn (21.73bn yuan), reported the Financial Times. 

This marks the first significant foreign investment in China’s burgeoning AI sector, particularly at a time when US restrictions have limited domestic companies to local funding sources. 

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Prosperity7 Ventures, an affiliate of Saudi Aramco, made the investment as part of Zhipu AI’s near $400m funding round.  

Zhipu AI, alongside its competitors Moonshot AI, MiniMax, and 01.ai, has previously depended on government funds and local cloud service providers for growth.  

Prosperity7’s participation as a minority investor could signal a shift in the funding landscape for China’s generative AI sector. 

Requests for comment were not answered by Prosperity7 and Zhipu AI, the FT said.  

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The involvement of a Saudi fund also underscores the kingdom’s intent to cultivate a technological ecosystem that can counterbalance US dominance in the AI arena. 

“The Saudis do not want Silicon Valley dominating this industry,” an undisclosed person familiar with the development said.  

The US government’s ban on certain investments in China’s AI sector and stringent export controls on advanced chips have prompted Chinese companies to seek alternative sources of capital. 

Historically, global tech investors like SoftBank and Tiger Global have funded Chinese AI initiatives, notably in surveillance technology with companies such as SenseTime.  

However, they have been less active in the generative AI space, paving the way for new investors. 

“The importance of Saudi Arabia to the Chinese tech ecosystem has grown so much because the US funds are not here,” a Beijing-based tech consultant told the publication.  

For Chinese AI startups, foreign investments such as these are crucial for accessing new markets and expanding their global footprint. 

The investment in Zhipu AI is part of a larger trend of collaboration between Saudi state investors and Chinese tech companies.  

Late in May 2024, Lenovo announced the issuance of $2bn in convertible bonds to Alat, a subsidiary of Saudi Arabia’s Public Investment Fund.  

This deal also includes the establishment of Lenovo’s regional headquarters in Riyadh and a new manufacturing plant in Saudi Arabia.