Chinese firms choosing California for investments, M&A
January 30, 2016

Chinese investors poised to target Artificial Intelligence deals in U.S.

With the proliferation of mobile devices, the growing ubiquity of the Internet and the increasing need for data collection, the development of artificial intelligence applications is becoming more important for the U.S. high tech sector. The growing relevance of the AI sector was demonstrated most recently in Jan. 2016 when Goldman Sachs and JPMorgan have indicated they would boost their investments in “big data” businesses and technology.

Artificial intelligence can include businesses that focus in machine learning, computer vision, NLP, data science, neural network and deep learning. High tech companies in both the U.S. and China are expanding into the artificial intelligence sector, in some cases through mergers or acquisitions (M&A) of existing companies, providing access to new technology, talent or resources. Here’s how the AI sectors are growing in the two countries and how M&A activity will be a key part of the industry’s expansion.

 

China tech companies expanding to Artificial Intelligence

Like its American counterpart Google, Chinese search provider Baidu is exploring more artificial intelligence applications. They include image reading apps like FaceYou that recognize distinctions between unique faces. But the company is also pressing into more advanced AI technology, like advanced neural networks that can search for malware. Baidu is also using AI to target ads, reports Wired.

Another Chinese Internet giant, online retailer Alibaba, launched a cloud computing unit in 2015 that is believed to be the country’s first artificial intelligence service. The concept would allow developers to use the service, called Aliyun, to predict what a user’s actions without needing to author original code to meet the needs, reports TechCrunch.  Since going public in 2014, Alibaba has made notable investments in efforts to grow through M&A activity, spending as much as $6 billion on a variety of retailers, tech companies, and manufacturers. The purchases expand the company into new areas like microblogging, online video and mobile dating, according to a report from Reuters.

And US high tech  industry leaders  in artificial intelligence are working to establish a stake in China. In October, Google purchased a minority stake in Mobvoi, a Beijing-based artificial intelligence firm that specializes in voice-controlled software. The firm has already worked with Google, providing it with Chinese-language voice search for some applications.

 

AI grows in the U.S. through M&A

The AI sector is growing in the U.S. There are nearly 900 companies operating in the U.S. AI sector, most of which concentrate in the fields of business intelligence security and finance, reports TechCrunch.  In 2015, there were 300 deals in the AI space, which followed the M&A market in AI heating up in Q4 2014. Several leading AI companies in the U.S. are startups that emerged from academia.

The U.S. tech market has seen a rise in M&A activity for AI companies in recent years, reports Market Realist, with Yahoo, Google and Twitter all making major acquisitions of companies developing AI technology like image recognition applications, natural language processing, and neural networks. Additionally, the U.S. is also home to several AI startups that are attracting funding from venture capital firms,  making them attractive candidates for M&A activity.  In 2015, AI investments accounted for nearly five percent of total VC funding.

 

China’s tech companies poised to invest

China’s Internet market is consolidating, as domestic M&A deals quadrupled in 2014 to nearly $55.6 billion, just as venture capital deal in the country surged to $29 billion last year. There’s an abundance of capital in the industry that’s helping to fuel consolidation and expansion, reports Bloomberg.

China’s internet giant Baidu is geared for more growth and like many Chinese firms in the tech sector, the Internet search giant has shown dedication to raising funds for M&A activity. After taking over a wireless app store in a $1.9 billion deal in January 2016, Forbes reports that experts are wondering where China’s internet industry will focus its future M&A activity.

The growing AI sector is an ideal location for M&A activity by Chinese high tech firms and investors. Any investment in the U.S. AI sector by Chinese investors could bring other benefits, said the Wilson Sonsini firm, including new exclusivity rights, potential control of Intellectual Property, R&D intelligence, access to talented workers and in some cases, a position in tech hub Silicon Valley.

 

Finding AI opportunities in the U.S.

Determining the best investment opportunities in the U.S. tech sector requires the help of financial advisors with experience marketplace. California-based Vasari Capital offers not only an expert view into the U.S. artificial intelligence sector, but our financial advisors offer the personalized service that meet the detailed financial and strategic challenges Chinese investors need to strike M&A deals. Foreign investors can rely on the knowledge, resources and contacts that Vasari Capital offers its clients.