HongShan Invests in Chinese AI Chip Startup to Rival Nvidia

HongShan, formerly part of Sequoia Capital and now a standalone Chinese venture capital firm, is making strategic investments in the AI chip industry. This includes a significant investment in Iluvatar CoreX, a Shanghai-based startup competing against Nvidia in China’s AI chip market. Iluvatar, valued at over $1 billion, is gaining attention as the U.S. imposes export restrictions on Nvidia’s advanced chips, underscoring the urgency for China to develop domestic alternatives.

HongShan’s investments in AI chip startups, such as Iluvatar CoreX, align with Beijing’s policy to boost homegrown technologies. This move follows the recent separation of HongShan from Sequoia Capital, a decision partly influenced by U.S. lawmakers’ concerns over potential technology transfer to China. Iluvatar CoreX specializes in graphics processing units (GPUs), essential for AI services like ChatGPT, and stands out with its claim of fully homegrown technology, unlike some rivals that have licensing deals with foreign companies.

Founded in 2015 by industry veterans, Iluvatar CoreX has developed a general-purpose GPU, positioning itself as a strong contender to Nvidia in China. The company’s growth reflects China’s ambition in the AI chip sector, now a focal point in the U.S.-China tech rivalry. Despite challenges in replicating Nvidia’s ecosystem, particularly its CUDA software libraries, Chinese companies like Iluvatar CoreX are progressing in offering alternatives.

The AI chip sector’s importance is further highlighted by other HongShan investments, including MetaX Tech and Moore Threads, both GPU developers. The latter faced a setback when added to a U.S. trade blacklist, potentially hindering its collaboration with Taiwan Semiconductor Manufacturing Co. Despite these hurdles, Moore Threads and similar companies continue to attract significant funding, primarily from domestic sources.

Iluvatar CoreX’s independent development of its GPU technology marks a notable distinction in a field where international licensing agreements are common. The success of Iluvatar’s GPU, commercially available since the third quarter of 2021, demonstrates the growing capability of China’s tech industry to innovate and compete globally. This trend is reshaping the AI chip market, indicating a broader shift in technological development and geopolitical influences.