U.S. export bans are set to hinder the attempts of a Hong Kong-based AI company, SenseTime, to diversify from surveillance to AI as it cannot access the advanced chips it needed.
The company, which was once a leader in China’s AI sector, has been trying to expand its business beyond its core security camera products, which it sells to Chinese authorities.
However, the latest U.S. government restrictions prevent Nvidia and other chipmakers from supplying the powerful chips used to train the latest AI models to Chinese customers and their foreign subsidiaries.
SenseTime went public in 2021 and has been seeking to reduce its dependence on its surveillance business, but investors are hesitant.
“No one wants to touch this space in China,” said Andy Maynard, head of equities at China Renaissance.
Andy also said that many foreign investors cannot invest in the surveillance sector due to the move to ban U.S. investments in China’s quantum computing, advanced chips, and artificial intelligence.
“SenseTime needs a dramatic catalytic event in the company to turn its share price around,” he said.
Knowing this, investors have shied away from the business altogether, with shares nosediving by more than 75% since last summer.
The company has also yet to turn a profit and has reached a low of $5.9 billion in market capitalisation from its initial $16.5 billion.
Despite the SenseTime’s A100 chips being in high demand for AI start-ups to train large language models and create domestic alternatives to OpenAI’s ChatGPT, the company is still hemoraging money.
A net loss of $330 million was reported for the first half of the year.
Now, Biden’s administration has made it harder for SenseTime to access Nvidia GPUs, which are essential for its AI systems.
“It’s the end of the road for the data centre. SenseTime can never buy another Nvidia chip,” one unnamed AI investor said.
“The more GPUs, the better the model. It’s more important than hiring PhDs. This is a bottleneck for Chinese companies,” the AI investor said.
SenseTime is ignoring the noise and instead claims it has “clear growth plans” and it is “confident of [its] long-term business prospects”.
“We take a proactive approach to secure our supply chain and to ensure our business resilience,” it said.
Critics worry that even if SenseTime succeeded in renewing its primary surveillance business and make it moneymaking, analysts say that it would do little to prop up its flagging share price.
“The number of investors in this space is incredibly narrow. What’s the upside of buying this with the sanctions fear? The company is underloved for reasons beyond its own doing,” said Maynard.
