The authorized Chinese company says that cheaper models can still win

China’s artificial intelligence race has no finish line. DeepSeek, Moonshot AI, Alibaba and a consumer electronics firm Xiaomi all have dropped new models in recent weeks, fighting for position on the leaderboards.

From early AI to social media, companies in every industry face increasing pressure to innovate, expand their user base and find ways to monetize. At the same time, they must deal with rising research and development costs and rising costs of computing power and hardware.

SenseTime, one of China’s first AI companies, is determined to stay relevant in the AI ​​manufacturing era. Long known for facial and image recognition, the company is now developing multimodal systems that can integrate text, audio and visual data.

Founded in Hong Kong in 2014, SenseTime has faced US sanctions over allegations related to surveillance of Muslim minorities in Xinjiang, which it has denied.

Its latest model, the SenseNova U1, combines language and vision processing in a single system, improving speed and efficiency by eliminating the need to interpret different methods.

SenseTime bets on cost efficiency as a competitive edge. The company has adopted DeepSeek’s approach to delivering high-performance models under financial and technical constraints, according to founder and chief scientist Lin Dahua.

While ChatGPT Images 2.0, an artificial intelligence tool from OpenAI that generates images from text messages, produces “very good and beautiful” results, the SenseNova U1 costs ten times less, Lin said.

“You may not need a high-end model in many cases where it can handle multiple tasks,” Lin told CNBC. “There is still a gap between us and international frontier models like OpenAI’s GPT Image 2 and (Gemini’s) Nano Banana, but our costs are very low – they are very efficient.”

With limited overlap between the US and Chinese AI markets, real competition may be closer to home.

ByteDance’s AI video model Seedance created competitive concerns at first, Lin said. SenseTime has since integrated some of its capabilities into its short video tool Seko, allowing it to integrate the back-generation of Seedance with its audio functions.

Technology is part of the battle, and business models are becoming increasingly important. OpenAI reported missing revenue and user targets, according to the Wall Street Journal, indicating a risk to Chinese and American players alike, Jefferies said in an April 28 letter.

Pure-play AI model companies face a difficult equation: low customer loyalty, limited differentiation, a crowded field and high training costs, Jefferies said.

Large online platforms, in contrast, have strong cash flows, access to user data and established customer bases to sell AI applications, the bank added.

In China, platform companies, including Alibaba, Tencent and ByteDance, can use their core businesses to fund AI development and improve existing operations, said Vey-Sern Ling, senior equity advisor at UBP.

“They are obviously in a better position than the independents, who continue to lose,” said Ling, while noting that the heavy use of AI is beneficial even for big players like Alibaba and Kuaishou.

separation, SenseTime integrated large-scale AI models, applications and infrastructure to improve service quality while reducing cost per use, Lin said. Many of its products target business customers, who tend to demand high-quality services, are willing to pay more and are less likely to switch suppliers.

SenseTime reduced its net loss by 58.6% last year and reported positive EBITDA in the second quarter for the first time since listing in 2021 – leading investors will continue to watch closely. Lin said the company’s AI costs are “manageable” and that it is focused more on making the models more efficient.

Shares of SenseTime it was up 2.5% during Wednesday’s open.

Pricing strategies vary from industry to industry.

Some companies, including DeepSeek, recently lowered prices and offered discounts to attract users. Some guys Zip have increased them – indicating a push to sell advanced models.

Alibaba cloud units and Baidu they also raised prices amid growing demand for AI computing power. ByteDance is planning a subscription service for some features of its popular AI chatbot Doubao.

“Price wars may be a strategic exercise in short-term promotion, but sustainability in the long run depends on differentiated value,” Lin said.

Analysts say some AI companies may be following the standard playbook offered by China’s big market: bleed money to gain market share before raising prices later to make money.

“They can’t continue to fund the use of AI because it’s too expensive,” said UBP’s Ling.

“Either they can paint a picture of great future consumption and demand and help investors understand that near-term losses are acceptable. Or they have to start making money as soon as possible.”

Faced with US export and investment restrictions, SenseTime has focused its global expansion on markets such as Southeast and North Asia, the Middle East, and most recently, Brazil.

The US-Israel war against Iran has caused temporary disruptions, affecting flights and communications, but Lin said the company’s long-term strategy in the region has not changed.

Cost efficiency and efficient use are very important in overseas markets.

“Many times, the reason for repeat purchases is not about the most advanced technology, but to provide the best service at a competitive price,” Lin said.