Chinese AI startups have raised at least $420 million this month, defying a steep drop in fundraising in China’s tech sector amid the Covid-19 pandemic.

Why it matters: China’s AI firms have grown off the back the government’s drive to become a leader in the technology by 2020 but haven’t been immune to the outbreak of the flu-like virus.

  • Nearly all facial recognition startups in China work with the country’s public security bureaus, which can be lucrative given authorities’ emphasis on domestic stability.
  • Nevertheless, these contracts have taken a significant hit during the first quarter.

Details: Speech recognition firm AISpeech, AI chipmaker Intellifusion, and machine learning firm 4Paradigm have collectively raised $429 million since the beginning of April.

  • 4Paradigm, which specializes in providing machine learning solutions to enterprises, announced on April 2 it had raised $230 million at a valuation of $2 billion.
  • Days later, Intellifusion said it had completed a pre-IPO round worth RMB 1 billion ($141.4 million) to fund R & D of its algorithms and chips, among others.
  • On Tuesday, speech recognition and analysis startup AISpeech announced its Series C, raising RMB 410 million.
  • The investments come after a difficult first quarter. Venture capital funding in China’s tech sector during the first quarter totaled RMB119.1 billion, down more than 30% year on year from RMB 173.6 billion, according to a recent report (in Chinese) by Itjuzi.com. The number of VC deals in the sector fell to 634 from 1,143 during the same period.

Context: Despite signs of a recovery in investor sentiment, the Covid-19 outbreak will likely have a significant impact on China’a AI firms, and the tech sector as a whole.

  • In a bid to slow the spread of the virus, Beijing in late-January extended the Spring Festival holiday by more than a week. Even after the extension, many businesses in China allowed their employees to work from home.
  • China’s AI companies will likely take a significant battering after the first quarter as their customers, including the government, tighten their belts after a difficult start to the year.

Christopher Udemans is a Shanghai-based technology reporter. He covers Chinese artificial intelligence, mobility, and cybersecurity. You can contact him at chrisudemans [at] technode [dot] com.