Yitu’s failure in IPO
After preparing for the listing for 8 months, one of the four major artificial intelligence (AI) unicorns in mainland China (the four AI dragons in mainland China includes Megvii Technology, CloudWalk, SenseTime, and Yitu) Yitu Technology voluntarily applied to withdraw from the SSE STAR market and officially announced the termination of the IPO on the SSE STAR market.
Why CSRC rejected?
The main reason why the IPO itself has not been reviewed by the China Securities Regulatory Commission and related institutions is that the main reason for Yitu Technology’s current losses is that it has achieved a valuation of more than RMB 10 billion in 15 fundraisings. Due to the continuous increase in the fair value of preferred stocks (the preferred stock can be regarded as increasement of company’s debt and share.
This explanation is easier for everyone to understand.) The company’s losses continue to increase ─ ─ AI companies are facing a general problem that they are facing a short-term difficulty in profitability due to large R&D investment. Currently none of the four major artificial intelligence unicorns in mainland China is making money, and it is losing a lot; as far as the early investors of unicorns are concerned, their funds have been locked for many years. Of course, they want to withdraw as soon as possible and take money.
The China Securities Regulatory Commission’s suspicion is not without reason. If these early major shareholders sell a large amount of equity in their hands as soon as they are listed, then all retail investors can only be harvested leeks. This is what the CSRC cares most about (they are doing the right thing, isn’t it?)
Three factors determine the development of AI
From a technical point of view, computing power, algorithms, and data are the three major elements that constitute the development of artificial intelligence. The computing power is completely determined by the hardware. Algorithms will gradually improve with the times and the input of more resources and experts, but it is difficult to make a big leap in the short term.
After all, the most important artificial intelligence algorithms are almost public. The current deciding factor is the data; because the two basic steps of artificial intelligence are training of data, and then inferences are made based on the training. The more data, the more accurate the final inference calculation result will be (there are Interested readers can refer to my other blog post “What kind of company is Palantir?“).
Chinese companies’ advantage
In Western countries, due to the awakening of the public and the restrictions of laws and regulations, the cost of obtaining data has become more and more difficult, and this is also the relative advantage of mainland China in the development of artificial intelligence.
The four major artificial intelligence unicorns in mainland China can survive mainly because of the continuous investment of capital and the comparative advantage that mainland China has obtained in artificial intelligence development materials, so that they can obtain endless project income; but there are still no outstanding achievements in terms of power and algorithm, because computing power is mainly monopolized by the US semiconductor giants (readers who are interested can refer to my other blog post “This company is changing the rules of the game“. ). The more advanced algorithms are still from U.S.
Public myth on artificial intelligence
The first is that the public has a myth about artificial intelligence, thinking that artificial intelligence is a panacea, and any company that gets involved with artificial intelligence will immediately cause the company’s value to skyrocket. Compared with twenty or thirty years ago, artificial intelligence has indeed made great progress (the three major elements have progressed), this is an indisputable fact. But artificial intelligence is not a special medicine.
Any company that uses computer algorithms does not necessarily use artificial intelligence. Moreover, the artificial intelligence algorithm runs behind the scenes, and the end user has no ability to judge whether the so-called magical artificial intelligence algorithm is used. It may also be a simple computer calculation or a general algorithm. Artificial intelligence is untouchable. You can make a phone call to ask nVidia (ticker: NVDA) their basic quotation for their HGX or DGX full set of platform servers, you will know what I mean, because companies without deep pockets simply can’t afford it.
AI is a technology used to integrate, not a product
Readers must be puzzled. Haven’t the five US technology giants made great progress in artificial intelligence? They should have made a lot of money, but they are not. Artificial intelligence is indeed very mature in certain fields, such as photo and video recognition and speech translation recognition. (Thirty years ago, license plate recognition was considered a black-box technology, but no one would think so now, right?)
Technology giants are mainly apply artificial intelligence and other technologies to their existing products and services to “strengthen” their ability to make money. The tech giants are not mainly making money by artificial intelligence “product”, artificial intelligence is just an aid. On the other hand, it is almost difficult for us to find a listed company that mainly sells core artificial intelligence technology, because artificial intelligence is only an auxiliary; the difference is very important.
AI term is abused
Self-driving technology, as we all know that artificial intelligence is its core, but now a bunch of cars on the road that claim to have self-driving capabilities, in fact, only have very preliminary “automatic” capabilities, not to mention “self-driving” (Musk himself admitted to the U.S. regulatory agency many times that Tesla autopilot currently only has the ability of L2, which is far from the goal of self-driving that most people think).
The term artificial intelligence has been abused endlessly (there will be similar situations in every generation, 25 years ago it was the term Internet, 15 years ago it was biotech). As long as you turn on the TV, why do advertisements for a bunch of things linked to the word “nano” ? Not only apparel, but also fodd linked to nano. Not all shiny things are gold.
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