China’s AI revenue projected to reach US$13b on breakthroughs, adoption: Goldman Sachs
Goldman Sachs has increased its forecast for China's AI model market revenue by 30% to US$13 billion, citing aggressive price cuts, technical advancements, and accelerated corporate adoption.
Intelligence analysis by Gemini 2.5 Flash
A new report from Goldman Sachs projects a significant surge in China's artificial intelligence model market, with annualised recurring revenue expected to hit US$13 billion by year-end. This upward revision is attributed to domestic AI players achieving remarkable cost efficiencies and technical breakthroughs, alongside intensifying competition driving down prices and boosting adoption.
Imagine a super-smart computer brain that can do lots of clever things, like writing stories or making pictures. In China, companies that make these brains are getting really good at making them work better and cost less money. Because they're getting so much better and cheaper, more and more businesses want to use them, like buying a new toy that's suddenly much cooler and more affordable. So, a big bank thinks these smart computer brains will make a lot more money than they first thought, because everyone wants them!
Analysis
A Soaring Forecast for China's AI Market
Goldman Sachs has significantly revised its projections for China's artificial intelligence model market, now anticipating annualised recurring revenue (ARR) to reach US$13 billion by the end of the year. This represents a substantial 30 per cent increase from its previous forecast of US$10 billion. The investment bank attributes this optimistic outlook to a confluence of factors, primarily aggressive price cuts by Chinese AI model providers, notable technical breakthroughs, and a rapid acceleration in corporate adoption across the mainland. This upward adjustment underscores a dynamic and rapidly evolving AI ecosystem within China, driven by both innovation and competitive market forces.
Intensifying Competition and Breakthroughs
The revised forecast is heavily influenced by the heightened competition among Chinese AI developers, which is leading to a better performance-to-price balance. Companies like MiniMax and DeepSeek are at the forefront of this trend. MiniMax recently launched its H3 multi-modal model, capable of processing various data types, at a price point significantly lower—30 to 50 per cent—than existing market offerings. Simultaneously, DeepSeek introduced API access for its V4 Flash model, demonstrating front-end coding capabilities that rival leading models like Zhipu AI's GLM-5.2, which ranks seventh globally in this specific area. These developments indicate that Chinese firms are not only competing on price but also pushing the boundaries of AI model capabilities.
Implications for Global AI Leadership
The rapid advancements and aggressive market strategies by Chinese AI companies are reshaping the global AI landscape. Goldman Sachs specifically lifted the projected year-end ARRs for Hong Kong-listed Zhipu AI and MiniMax to US$2.5 billion and US$1 billion, respectively, signaling confidence in these domestic players. The report emphasizes that the competition for the optimal performance-to-price ratio is expected to intensify further, suggesting a continuous cycle of innovation and cost reduction. This trend could solidify China's position as a major force in AI development and adoption, potentially capturing a larger share of the global AI token market and influencing future technological standards and pricing models worldwide.
Key points
- Goldman Sachs raised its forecast for China's AI model market revenue by 30% to US$13 billion by year-end.
- The increase is driven by aggressive price cuts, technical breakthroughs, and accelerating corporate adoption.
- Chinese AI models are achieving new frontiers in performance per dollar, intensifying competition.
- MiniMax launched its H3 multi-modal model at 30-50% of incumbent market prices.
- DeepSeek's V4 Flash model now rivals Zhipu AI's GLM-5.2 in front-end coding capabilities.
The rapid advancements and aggressive pricing strategies by Chinese AI firms are expected to drive widespread adoption and innovation, making advanced AI more accessible and affordable globally. This could lead to a virtuous cycle of development, further enhancing capabilities and expanding the market's overall value.
