ChatGPT rival keeps IPO flame burning

Artificial intelligence solution provider and ChatGPT rival Mobvoi is making a second attempt to go public in Hong Kong after rolling out its self-developed Chinese generative AI tool to the public last month.

However, the economic downturn in the mainland is threatening the start-up backed by Google and Volkswagen, with the revenue shrinking and the net loss widening in the first half of the year.

Mobvoi was set up in 2012 by co-founder and chairman Li Zhifei, a former machine learning and machine translation scientist at Google.

It initially focused on human-machine interaction technologies with voice interaction as its core before turning to AI-generated content.

Based on its voice search engine technologies, Mobvoi built up an AI-focused portfolio ranging from smart TicWatches and other AI-empowered devices to generative AI services for content creators and AI software for enterprises.

In 2020, it developed its universal Chinese Language AI or UCLAI, a large-language model or LLM on which products like OpenAI's ChatGPT are built.

UCLAI was upgraded to Sequence Monkey earlier this year, which is equipped with multi-modal generative capability and has the ability to understand and generate humanized text, audios, images and videos.

The company opened Sequence Monkey for public use in November, following in the footsteps of Chinese tech giants Alibaba (9988), Baidu (9888) and Tencent (0700), who have all rolled ChatGPT-like AI products over the past few months.

Mobvoi then unveiled an AI voiceover assistant called Moyin Workshop and its international version DupDub, as well as an AI avatar, Weta365, for the generative AI market.

Mobvoi says its existing products can take advantage of Sequence Monkey. For instance, the prosody and naturalness of synthetic speech can be improved and more AI writing templates are available for content creators, while digital avatars can have more natural expressions and their mouth movements are more synchronized.

Mobvoi serves more than 12 million users globally, covering content creators, enterprises and customers.

With the help of the LLM, its revenue grew over the last three years to 500 million yuan (HK$545.5 million) in 2022, though it suffered a net loss of 669.8 million yuan in 2022.

And the contribution of AI solutions has risen from 60.6 percent in 2022 to 77.9 percent for the first half of 2023.

However, revenue for the first six months of the year dived 23.7 percent yearly to 261.76 million yuan, and the net loss widened by 8.7 percent to 218.3 million over the same period.

Mobvoi says the fall in revenue was due to lower income from its largest customer Volkswagen, which invested US$180 million (HK$1.4 billion) into the start-up in 2017 in exchange for in-vehicle AI technologies, as well as lower sales of its smart devices and other accessories.

The startup also lists the overall economic growth in China - its major market - as one of the major factors that could continuously affect its performance. The world's second-largest economy is projected to grow by 5.4 percent this year but slow down to 4.6 percent in 2024.

Mobvoi's reliance on its largest client has deepened as well, with the proportion to total revenue rising to 53 percent as of the end of June 2023 versus 42.6 percent in 2022.

Though Mobvoi is the top player in generative AI in China, its market share was only 9 percent in terms of revenue.

It ranks ninth globally with a market share of 0.9 percent with US$5.7 million in 2022, far behind the top player OpenAI which earned as much as US$95 million and is backed by Microsoft.

While Mobvoi's cash and cash equivalents jumped fourfold to 202.8 million yuan during the first half of the year, the start-up warns that it will continue investing in research and development, which could hurt its short-term profitability and might not result in the expected performance, as the market is competitive in China and around the globe.