A year removed from its ascension to the top in global Artificial Intelligence (AI) venture capital investment, China is now bumped back to second place by the resurgent United States.
Based on publicly available venture capital investments in AI startups across the world, analyst firm ABI Research found that the United States commanded the most AI investment values in 2018 globally at 52.3%.
Based on the investment figures in 2019, the gulf between the United States and China will continue to get wider, with the US share expected to reach 70%.
After losing its first spot to China in 2017, the United States stomped back in 2018 with a total of $9.7 billion in AI investment, an impressive 120% year-on-year increase. The investments by the likes of Cruise Automation, Dataminr, Zoox, and Zymergen propelled this growth, which could further increase to $14 billion in 2019.
“The United States is reaping the rewards from its diversified AI investment strategy. Top AI startups in the United States come from various sectors, including self-driving cars, industrial manufacturing, robotics process automation, data analytics, and cybersecurity. All these startups research on and invest in cutting edge deep learning technologies in their solutions, democratizing AI for enterprises and end consumers,” said Lian Jye Su, principal analyst at ABI Research.
On the other hand, AI investment in China was a slightly different scenario. Overall, the country still experienced a healthy year-on-year growth rate of 54%, with a total of $7.4 billion.
Since 2016, AI has been of special interest in China, particularly around machine vision, which has translated into the creation of hugely successful AI startups with large market reach and deep technology, including SenseTime, Yitu Technology, and CloudWalk.
However, China’s focus on certain strategic areas of AI technology starts to become a double-edged sword. Now that these Chinese startups have cornered the domestic market, they are facing challenges expanding into overseas markets due to different regulations and market conditions.
Another challenge lies in the slow adoption of AI in traditional enterprises in the domestic market. As compared to the United States and Europe, where labor cost and skill shortage are key concerns, China continues to enjoy the benefits of an affordable labor force, especially in industrial manufacturing.
Major enterprises are still leaning on conventional workflow and not aggressively embarking on digital transformation. This means less risk-taking in AI startups that are less mature.
Looking forward, the AI investment in 2019 looks promising, but China is expected to continue suffering from strong headwinds. The trade war between the United States and China has resulted in collateral damage in AI investments in China.
The effort to curtail Chinese firm’s access to strategic US technology seems to have achieved the short-term goal of halting AI advancement in China.
“There is no doubt that Chinese AI investment is feeling the pinch of reality, but China is still undeniably the largest single market for AI implementation. Favorable policies and flexible regulations in China, backed by a government willing to invest and deploy innovative technologies at scale, will certainly amplify AI adoption in the region,” said Su.
“While the United States may be leading in investment in AI research and development, in the longer term, China will be able to capitalize on those technologies and bring them to the masses.”