The Abacus's 2024 Predictions: AI, TikTok, US-China relationship and more

Hey, welcome back! It's 2024, and in the Chinese Lunar calendar, it's the Year of the Dragon – which happens to be my zodiac year. There's an old belief that your zodiac year can swing one of two ways – it's either a home run or a total bust. I hope being in the US will help me avoid this superstition. Just kidding. But seriously, one of my top goals this year is to keep this newsletter updated and to provide more AI analysis.

2024—after a whole year of AI development and millions in investment—we can already start to see the bigger picture of AI. It is poised to be a HUGE year for AI fields, both in Asia and Silicon Valley. I have some predictions for 2024, covering the US-China relationship, AI, TikTok, and more. I hope it's not too late to write about this.

So, here’s the scoop: 

AI companies in Silicon Valley, China, and the EU are each taking their own distinct development paths. I recently read Digital Empires: The Global Battle to Regulate Technology during my winter break. Professor Anu Bradford discusses in her book the three distinct digital governance models in the U.S., China, and the EU. I’m thinking these differing data regulatory models determine how AI companies use data to train LLMs and other AI technologies, and how these technologies are implemented in practice.

We’ve already seen the EU reach a political agreement on the AI Act, setting a new benchmark last December for countries looking to leverage the potential benefits of AI. In China, recent lawsuits regarding the copyright of AI-generated images imply that the government is encouraging the use of this evolving technology for creative endeavors. At least at the Beijing level, there is still a watchful eye on the development of this field. After this pivotal year of 2024, I’m curious to see how these three systems will forge their own paths in AI development.

The relationship between China and the U.S. is easing, but companies looking for foreign markets are hiding their Chinese roots to avoid political risks. Despite numerous media analyses suggesting that China and the U.S. will increasingly decouple in many areas, I believe the two presidents won't cause major upheavals in 2024, either politically or militarily. 

One reason is that this year marks the 45th anniversary of diplomatic relations between China and the U.S., and the leaders of both countries have exchanged greetings at the beginning of the new year. Additionally, in this election year, Biden needs to demonstrate to his supporters and voters that he can manage the relationship with China effectively.

However, the trend of Chinese companies downplaying their Chinese origins is only deepening. For instance, on the websites of Shein and Temu, there's no mention of their Chinese roots. These companies are keeping a low profile as they target foreign markets. A recent example is HeyGen, a leading AI video startup founded by two China-born engineers. They shut down their operations in China after receiving an investment of $5.6 million. I completely understand why the company's executives made this decision; no one wants to be a pawn sacrificed in the power play between Beijing and Washington.

Most AI companies specializing in LLMs might struggle to survive in 2024. Just like in Silicon Valley, all the major internet companies in China are developing their own LLMs, and the giants are competing for a new entry point in the market. This reminds me of my experience tracking the fitness mirror industry in China. One founder told me, “Nobody knows if a new product will be profitable, but you need to show the public and investors that you have a seat in this.”

However, whether it’s in Silicon Valley or China, I believe that eventually only 3-4 companies capable of mutually competing will remain in the LLM space. In Silicon Valley, the high development costs and limited computing power for large models suggest that only the most advanced and cost-effective models will dominate. There's little incentive to opt for secondary options.

In China, the first batch of LLMs to receive political approval are likely to lead. This year, it's crucial for both established tech firms and startups to validate their business value, following the initial investment frenzy. They need to demonstrate tangible benefits to attract further VC investments.

AI is evolving from basic models to more specialized applications. Startups unable to lead in model innovation might pivot to developing these applications. Although numerous foundational models emerged in 2023, a standout AI application with lasting appeal is still awaited. The industry needs a breakthrough app that showcases AI’s practical benefits to consumers, much like how “Angry Birds” drove iPhone sales.

In 2024, big tech companies are expected to roll out development kits, enabling creators to build AI applications for specific scenarios, thus drawing in more users.

Bonus: A key trend for AI applications is the focus on companionship. This indicates that lasting success may be found in customizable AI companions, like Character.ai. In China, the existing market for AI virtual companions is already strong, thanks to the popularity of virtual idols and female-targeted games. This signals a ready market for immersive, emotionally engaging AI products.

Despite global scrutiny, TikTok probably won't be banned, yet it's likely to face more lawsuits over content moderation. Shouzi Chew, representing TikTok, attended a March hearing by the House Committee on Energy and Commerce. In the eyes of some U.S. senators, TikTok has been depicted as a “boogeyman”, seemingly an extension of the Chinese government threatening U.S. security, though this characterization lacks concrete evidence.

Some states are banning TikTok on public devices. However, these bans aren’t slowing TikTok down, especially not among teens who are all over the app. Sensor Tower stats show that TikTok's not far behind Instagram, racking up a whopping 749 million downloads globally. This just goes to show how TikTok still the king of the short video world, with no real challenger in sight.

While the U.S. can’t fully block TikTok at all, senators, particularly in an election year, are likely to continue using the platform as a tool to express their stance on China. This could potentially alienate Gen Z voters, a key user base of TikTok, from the D-Party. The main criticism of TikTok moving forward will probably center around its content moderation practices. Shouzi Chew may even face another hearing on this issue.