The ai unicorns that continue to lose money are still popular, and the market value of SenseTime once exceeded 300 billion

Text/Yang Jianyong

SenseTime, the first of the four AI tigers, was listed ahead of unicorns such as Megvii and Yuncong, and despite the bumpy listing process, it was successfully listed on the Hong Kong Stock Exchange on December 30, 2021. Through 7 trading days, it is obviously favored by investors, and the market value once exceeded 320 billion Hong Kong dollars (about 41 billion US dollars). The current market capitalization is HK$245 billion (us$31.4 billion), up 91% from the HK$3.85 issue price. Due to its strong performance in the capital market, it has attracted countless attention, but the continuous losses need to be improved. In particular, the loss not only shows an upward trend year by year, but also the amount of loss is also amazing.

The data shows that in 2018, 2019, 2020 and the first half of 2021, SenseTime lost 3.432 billion yuan, 4.967 billion yuan, 12.158 billion yuan and 3.713 billion yuan respectively, with a cumulative loss of 24.27 billion yuan during this period. It should be pointed out that the loss of more than 24 billion yuan is mainly due to the fair value loss of preferred stock. During the period, the adjusted net loss of EBITDA was $150 million, $1,155 million, $707 million and $578 million, respectively, and the total adjusted loss for three and a half years was $2.59 billion.

Of course, not only SenseTime, but other AI unicorns are also in a loss-making predicament. In 2018, 2019 and 2020, Yuncong Technology lost 181 million, 1.708 billion and 690 million yuan respectively, with a loss of 323 million yuan in the first half of 2021 and a cumulative loss of 2.9 billion yuan in three and a half years. Yitu Technology lost more than 7.2 billion yuan during this period, and Megvii Technology, Yuntian Lifei, Geling Deep Pupil, etc. were also in a loss situation. In addition, it should be pointed out that in the past, as an AI chip unicorn Cambrian was listed on the Science and Technology Innovation Board, the previous few trading days were also highly sought after by capital, and the market value once exceeded the 100 billion mark, with the highest market value of up to 119.1 billion yuan.

Unfortunately, compared with the pursuit at the beginning of the listing, Cambrian began to enter a long period of shock downward, with a market value of 36.4 billion yuan as of January 7, 2022, a 69.4% reduction in market value compared with the previous high, and a market value reduction of 82.7 billion yuan. In the author's opinion, long-term losses are difficult and competition is becoming increasingly fierce, and it is difficult to support the Cambrian market value of 100 billion. The cumulative loss from 2017 to 2020 exceeded 2 billion yuan. The loss in 2021 was further expanded, with a loss of 629 million yuan in the first three quarters of 2021, an increase of 103% over the same period of the previous year, and a loss of 310 million yuan in the first three quarters of 2020.

Today, SenseTime has doubled in a few trading days after its listing. At the same time, compared with the high has been pulled back by 24%, it is difficult for the market to predict whether SenseTime can reach a new high in the future. Overall, many factors such as technology landing, continuous losses, and intensified competition will gradually become rational and return to value. It should be known that the players on the artificial intelligence track finally compete in the ability to land technology, which is also an important basis for measuring the strength of AI. SenseTime's AI landing scenarios are mainly in four major sectors: smart business, smart city, smart life, and smart car.

According to the latest report of IDC, an authoritative research institution, China's computer vision market reached 990 million US dollars in the first half of 2021, which is converted into 6.3 billion yuan at the current exchange rate. Although the size of a market is not large, in the market share, SenseTime has the highest share and ranks first in the industry. Judging from the report, it can be seen that SenseTime HAS a strong ability to land AI. Combined with revenue, revenue has grown strongly over the past few years. Revenue in 2018 was 1.853 billion yuan, and by 2020 it will grow to 3.446 billion yuan, with a compound annual growth rate of 36.4%. Revenue in the first half of 2021 was 1.652 billion yuan, an increase of 91.8% year-on-year.

In terms of business model, SenseTime has a high degree of scalability, and its general artificial intelligence infrastructure, SenseCore, integrates the R&D and production capabilities into a unified underlying layer, providing a smooth, standardized, end-to-end AI model production process. With SenseCore, a wide range of AI models that can be scaled and adapted to a wide range of scenarios can be mass-produced. By the end of June 2021, SenseTime had accumulated more than 22,000 AI models that enabled different applications.

Revenue streams are mainly software licensing, AI hardware and software products and related services, as well as the provision of software and hardware integrated products and related services that combine ARTIFICIAL intelligence chips or ARTIFICIAL intelligence sensors to enable AI models to operate efficiently. At present, smart business and smart city are the core sectors, accounting for 86.8% of total revenue. We can see the strength of SenseTime AI on these two tracks, among which the smart city business covers cities from 21 in 2018 to 119 cities in the first half of 2021. The total number of customers increased from 732 in 2018 to 1225 in 2020.

Of course, the artificial intelligence market brings together many heavyweight players, not only Huawei, BAT heavyweight giants, but also giants from Hikvision, Dahua, iFLYTEK and other market segments. SenseTime points out that competitors may have a longer history of business operations, or they may have or will have access to more financial resources, more advanced technical capabilities, and a wider customer base and relationship than we do. Also, as SenseTime expands into areas such as cloud services, competitors, the basis of competition will be different and may face more competitors.

In the face of market competition, HK$5.552 billion was raised to enhance research and development capabilities, including expanding the computing power of AIDDc, strengthening the design of AI chips and developing its own AI chip solutions, and enhancing the capabilities related to AI models. SenseTime invests heavily in R&D to support product and service innovation. With the continuous improvement of SenseCore's technology and production capabilities, it will benefit from the continuous improvement of AI model production efficiency. Taking advantage of the increasing production efficiency and production capacity, it is proposed to reduce the marginal cost of producing artificial intelligence models and accelerate the increase in revenue, generating considerable operating leverage.

Finally, the artificial intelligence market has broad prospects, empowering the transformation of thousands of industries and boosting the acceleration of industrial intelligence. For example, in the manufacturing industry, the use of artificial intelligence, Internet of Things and other new technologies to promote the manufacturing industry towards intelligent manufacturing transformation, production efficiency has been greatly improved, laying the foundation for the sustainable development of enterprises. The financial and retail industries are also increasing investment in technology, applying cutting-edge technologies such as artificial intelligence, and adopting automated processes in products, channels and scenarios to serve users more efficiently. This is mainly due to the significant improvement of computing power, the improvement of algorithms, the increasing maturity of artificial intelligence technology, and the reduction of hardware costs, making artificial intelligence technology widely used in all walks of life. It can be said that artificial intelligence affects every industry.

Among them, edge artificial intelligence, computer vision, etc. are the most potential markets for artificial intelligence. A recent new survey by Gartner found that respondents to organizations investing in artificial intelligence said they had the highest planned investment in computer vision, with an average investment of $679,000 over two years. Investment in artificial intelligence will increase, and for players on the artificial intelligence track, they will reap this market dividend.

Yang Jianyong, a contributor to Forbes China and winner of the NetEase 2020 Most Influential Award, is committed to in-depth interpretation of cutting-edge technologies such as the Internet of Things, cloud services and artificial intelligence, and his views and research strategies have been cited by many authoritative media and well-known enterprises.