Chinese AI Startups Trail American Rivals in Revenue

Chinese startups trail American rivals in revenue.

Chinese startups are significantly lagging behind their American counterparts in terms of revenue, according to a report by Unique Research and the San Francisco-based consultancy Tech Buzz China, as reported by SCMP.

As of August, only four AI applications from private Chinese companies made it into the top 100 for annual recurring revenue. Glority, Plaud, ByteDance, and Zuoyebang collectively earned $447 million, a mere 1.23% of the total $36.4 billion.

The study excluded applications from publicly traded giants Alibaba Group Holding and Tencent Holdings.

Rui Ma, co-founder of Tech Buzz China, explained the imbalance by pointing to the structure of China’s economy—local startups aim for quick profits, often prioritizing short-term projects such as government contracts.

“Attracting global consumers and enterprises requires much more capital,” she said.

Ma added that it is more challenging for Chinese companies to attract such capital in domestic markets.

Leaders

The most profitable among Chinese firms is Hangzhou-based Glority, developer of the popular plant identification app PictureThis. Its annual revenue reached $173 million, placing it 20th in the ranking.

Leading the list are American startups OpenAI and Anthropic, with revenues of $17 billion and $7 billion, respectively.

Delta Wu, head of Unique Research, noted that the estimates are based on internal models that account for traffic redirected from each product’s official website to third-party payment platforms like Stripe.

Nineteen out of the 23 most profitable Chinese applications earned the majority of their revenue abroad, indicating growth potential in these markets, according to Ma.

Financial Challenges

While American firms report higher revenues compared to their Chinese competitors, they also make multi-billion-dollar investments in developing data centers.

Analysts at Morgan Stanley expect that over the next five years, the total capacity of data centers will increase sixfold. They forecast that by the end of 2028, the combined value of data centers and related equipment will reach $3 trillion.

An April report by McKinsey indicated that by 2030, meeting the growing demand for AI infrastructure will require capital investments of around $5.2 trillion. In comparison, spending on data centers serving traditional IT applications is estimated at $1.5 trillion.

Current revenues of AI companies may not justify the enormous computational costs, according to HSBC CEO Georges Elhedery.

Another issue is the high energy demand of data centers. Rising demand is driving up tariffs, which causes discontent among ordinary consumers.

Back in October, analysts identified energy as the world’s most valuable resource due to the AI boom.