Photo shows the booth of SenseTime at the World Artificial Intelligence Conference on July 7, 2021. Photo: VCG

Chinese artificial intelligence (AI) company SenseTime has submitted an application to the Hong Kong Exchanges and Clearing (HKEX) for a proposed IPO that may become the world's largest in the field of AI with a valuation of $12 billion.

AI companies have been developing rapidly in China, including Megvii, SenseTime, CloudWalk and YITU, which are known as the "Four AI Tigers" of China. All four have started IPO procedures with SenseTime drawing the most financing and has the highest value.

According to its application to the HKEX submitted on Friday, the company has raised 12 rounds of financing so far. However, it's been losing heavily for years and has a high gearing ratio. Its revenues reached 1.6 billion yuan ($247.2 million) in the first half of 2021, while net loss was 3.7 billion yuan.

The other three leading AI firms are also losing money with high gearing ratios.

SenseTime has invested heavily in the research and development of AI projects, including high staff and equipment costs, and it takes a long time for products to achieve market acceptance, which is why it's losing money, Ma Jihua, a veteran industry analyst, told the Global Times on Sunday.

"Despite capital turnover difficulties, Chinese AI companies still have bright perspectives, in line with China's development concepts. With a stock listing, SenseTime can expand its financing platform with further enhanced influence, which will improve the funding situation," Ma said. 

Meanwhile, Chinese AI companies are facing tighter regulations amid an uncertain external environment.

China passed a Personal Information Protection Law on August 20, aiming to regulate businesses' collection, storage and use of personal data, and their handling of key data concerning national security. 

SenseTime has said that any actions, whether intentional or unintentional, of the company that resulted in defects or the misuse of AI could have a material adverse effect on its business and financial conditions.

Chinese AI companies, including SenseTime, are also facing tough US scrutiny. 

On July 9, the US Commerce Department announced that it had placed over a dozen Chinese entities on its trade control list for export restrictions, including these four leading Chinese AI companies, alleging that they were "engaged in activities that violate US foreign policy and national security interests."

Global Times