China’s SenseTime soars 36% after unveiling more robust AI model

(Bloomberg) — Shares of SenseTime Group Inc. soared by the most in more than two years after the release of the latest version of its SenseNova generative AI model, highlighting intense interest around China’s efforts to develop artificial intelligence.

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Shares rose as much as 36% after the company unveiled SenseNova 5.0 during its Tech Day event in Shanghai. The ChatGPT-like platform has “significantly improved” in terms of linguistic and creative capabilities, President Xu Li said in a statement. Trading in the shares was suspended following the abrupt rise.

SenseTime is among a growing number of Chinese companies and startups exploring ways to develop a response to OpenAI’s ChatGPT. In 2023, it joined Baidu Inc. and Alibaba Group Holding Ltd. in developing its own in-house generative AI platform. Since then, the potentially transformative technology has become a key area in which Beijing is encouraging local companies to compete with their US counterparts.

SenseTime’s rally on Wednesday may result in part from a depressed valuation. The company, once celebrated as a leader in China’s AI space, has lost more than 80% of its market value since an IPO in 2021, after the US sanctioned the company in the same way it did Huawei Technologies Co. founder last year also shook investors.

“There are very few details to justify such a move, other than the fact that expectations are very low and the shares are oversold,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “There are almost no fundamentals to rely on.”

Read more: Billionaires and bureaucrats mobilize China for AI race with the US

SenseTime touted its AI model’s ability to create text and visual content, not unlike OpenAI’s Sora. It also cited benchmarks to emphasize SenseNova 5.0’s improvements over the previous iteration.

SenseTime, once a leader in AI-based facial recognition, has stepped up efforts in generative AI after apps from ChatGPT to Sora woke up the global technology industry. It launched the first SenseNova in April 2023 and was one of the first groups of Chinese companies to obtain government approval to implement services to the public.

The company is trying to reverse a dramatic slowdown in growth in the face of rapidly intensifying domestic competition and geopolitical tensions. The US government blacklisted the company in 2019 over allegations related to human rights violations in Xinjiang. This has restricted its access to capital and crucial US technology components, compounded by restrictions on the sale of advanced AI chips and chip production equipment to Chinese companies.

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Short seller Grizzly Research in 2023 accused the company of inflating revenues, which SenseTime denied. Its shares remain one of the most shorted technology stocks in Hong Kong, according to data from S&P Global. Short interest represented more than 10% of SenseTime’s free float shares, which hit a record low on Friday.

“The AI ​​craze has never disappeared in China and is considered an important part that can stimulate China’s technological revolution and promote productivity,” said Shen Meng, director of Chanson & Co. “However, the big models of China lack computational support and innovation in academic research, and many companies rely on marketing to keep it a hot topic.”

(Updates with analyst comments from fourth paragraph)

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