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Zhang Wei, Chairman of CoStone Capital: Optimistic About the AI Productivity Revolution Brought by ChatGPT



At the recent Shenzhen Qianhai " The Venture Capital Day Of Shenzhen" forum, Zhang Wei, Chairman of CoStone Capitalexpressed optimism about the AI productivity revolution brought by ChatGPT and the emergence of new application scenarios in industries such as office, education, healthcare, and imaging. Based on it,CoStone Capital will focus on investing in companies that specialize in computing power, storage, data, and large-scale models in the future.

Zhang Wei stated that artificial intelligence has gone through three major stages of development from 2012 to the present.

The first stage, from 2012 to 2016, saw limited applications of artificial intelligence in fields such as facial recognition and license plate recognition, represented by companies like Google, META, Baidu, and Alibaba. Zhang Wei mentioned that during this period, CoStone Capital invested in companies like SenseTime, CloudWalk Technology, and Innovation Works.

The second stage, from 2017 to 2021, witnessed the expansion of AI applications into fields such as internet entertainment, smartphones, smart healthcare, and autonomous driving. In this stage, CoStone Capital invested in companies like 4Paradigm and SmartMore, according to Zhang Wei.

The third stage began in 2022, where AI disruptively revolutionizes productivity, and the birth of ChatGPT4 has the potential to reshape all industries and create new applications, represented by companies like OpenAI.

Regarding ChatGPT, Zhang Wei mentioned that its core lies in algorithms, computing power, and data, which require a mighty infrastructure for artificial intelligence. For instance, OpenAI's technological breakthrough relies on powerful Nvidia GPU chips. "There is a significant gap between China's current GPUs and those of Nvidia and AMD. Additionally, there is a noticeable disparity in storage chip technology compared to foreign companies like Samsung."

Looking ahead, Zhang Wei recommended that China should focus on investing in and supporting infrastructure companies related to algorithms, computing power, data, and more. He specifically emphasized the significance of the "three factors: proactive government, innovative capital, outstanding entrepreneurs" in areas like Shenzhen, Beijing, and Shanghai, where the government is aiming to seize the next round of AI industry leadership.

Firstly, the government should continuously upgrade and establish new-generation computing centers to meet the requirements of the new AI industry. At the same time, existing supercomputing centers should be studied to adapt to the needs of the new generation AI industry.

Secondly, the government needs to support the development of local GPU and storage chip companies, covering areas from computing power to storage.

Furthermore, the government should establish data sharing platforms.

Additionally, the government should strongly support the development of innovative capital and utilize market-based approaches to promote industry competition, ultimately selecting outstanding AI entrepreneurs.

According to Zhang Wei, the United States has constructed the Silicon Valley innovation ecosystem, which involves collaboration between companies, universities, national laboratories, independent research labs, platform service providers, public and private clients, multiple institutional entities, startup companies, and investors.

According to Zhang Wei's introduction, the United States has established the Silicon Valley innovation system in the development of the AI industry. This system involves collaborations between companies and universities, national laboratories, independent research labs and universities, platform service providers and public or private clients, multiple institutional entities and various partners, as well as cooperation between large corporations, institutions, startups, and investors.

Drawing on overseas models, Zhang Wei also mentioned that Shenzhen needs to formulate a comprehensive industrial plan by planning production lines and designing system layouts. This entails creating a blueprint to establish an overall industry planning framework. Simultaneously, Shenzhen should focus on talent introduction, identifying and recognizing entrepreneurs, and supporting the development of private enterprises. "More importantly, Shenzhen needs to invest substantial resources to strongly support the development of the AI and chip industries.

The year 2019 marks the fortieth anniversary of China’s Reform &Opening-Up, once again, we meet at the turning point of history. What’s the next step for the game, is there any clear guidance? The answer is affirmative.

Our country is enjoying a good momentum of development, which does not come from the Washington Consensus nor the Beijing Consensus. China’s experience has proved that both the visible hand and the invisible hand are crucial: the visible hand, stands for the government-led reform, and would yield benefits for reform and opening up; the invisible hand, stands for the Marginal Power represented by the private sector, and would improve economic efficiency and tax collection, create jobs and employment opportunities.

Provided that we want to protect and expand the benefits form reform, three simple but mandatory agreements are to be made and followed: No.1 Private ownership must be recognized, protected and treated equally with public ownership constitutionally, both ownerships are scared and inviolable;No.2 Make further clarification of the principal position of market economy, “deepen economic system reform by centering on the decisive role of the market in allocating resources”, as President Xi addressed in the third Plenary Session of the 18th CPC Central Committee;No.3 Implement the guiding principles of “comprehensively promoting law-based governance” of the fourth plenum. The rule of law is essential for economic growth, irreplaceable to protect private ownership, and necessary to encourage innovation and entrepreneurship.

Above are three rules for us to avoid falling into the Middle-income Trap. Assuming that we are breaking systematic barriers to private enterprises’ participation in market economy, and boosting innovation and entrepreneurship of our society, then we are heading towards a promoting direction. We are marching in the path of light, regardless of the ups and downs of Sino-US relationship, the drop in GDP growth rate, or the monetary policy.

These principals also apply on knowing how better to run a business: don’t be hedged by rules and regulations at the beginning, pay more attention to your survival, and you’ll learn more when you start your second business.

For many years, Huawei has been the only Chinese company on the list of the Top 50 R&D Spenders. Regardless of the economy and its income, what Huawei has been doing is investing in its future, dedicated to R&D, continuously and resolutely. This provisional work underscores Huawei’s accomplishments, making Huawei anindustry leader.

So, there are standard answers on how to run a company,which could be summarized as concentration and professional dedication, continuous investment on innovation and trying harder in R&D. Entrepreneurship is also important, every single company needs entrepreneurs to push aside all obstacles and difficulties, to implement strategies and ideas. We, as investors, are destined to look for such outstanding entrepreneurs and their companies, invest in them and partner with them.

At this key point of history, a country, a company, or asingle individual, will all need to find the right path. Four decades after the Reform and Opening-up, it’s time to learn from our experience and stop “wadding across


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