Chinese film entirely made with AI earns little, but generates investor interest

Chinese companies in the artificial intelligence (AI) and semiconductor sectors have lost $480 billion (equivalent to approximately 2.52 trillion Brazilian reais) in market value in less than four months. This decline is attributed to concerns over AI demand, excessively high asset valuations, and potential restrictions on Chinese exports.

The STAR50 index fell by 40% during this period, interrupting two years of growth. The CSI300, the main index of large Chinese corporations' stocks, also suffered, dropping by about 20% from its peak reached in June.

The wave of selling did not have a single cause. Sources familiar with Reuters indicate that high stock prices, tax burdens, and the risk that the US and other countries will restrict the use of Chinese equipment in data centers are contributing factors.

The significance of the crisis lies in the share this sector held on the stock exchange. According to Goldman Sachs, AI-related stocks accounted for 42% of market capitalization and 57% of trading volume in mainland China and Hong Kong.

Among the affected companies are manufacturers of robots, chips, and components used in technological equipment. For the latter group, part of the pressure stems from actions taken by Washington aimed at restricting component supplies to data centers in the United States.

The devaluation has impacted investors who were betting on the growth of technology companies. Chen Wensheng, an entrepreneur from Hainan province, told Reuters that he purchased shares relying on official support for firms like Unitree, which received investments from Chinese state funds. Now, he and his acquaintances are incurring losses.

The downturn may also hinder capital raising for technology companies aiming for initial public offerings. Hong Hao, Managing Partner and Chief Investment Officer at Lotus Asset Management in Hong Kong, believes the crisis will slow down new stock offerings.

Despite the losses, valuations remain high. STAR50 trades at approximately 100 times annual earnings, which is lower than the peak level of nearly 250 times. For comparison, the Nasdaq 100 multiplier in the United States is around 30 times.

This turbulence occurs against the backdrop of efforts by Chinese authorities to reduce market volatility and improve investment returns. Measures being taken include combating high-risk operations and high-frequency trading. State investors have also sold shares during periods of growth to curb profits.

According to Leo Wang, a partner at Qianchuang Capital in Beijing, the excessive concentration in technology companies disrupts market balance. He stated: 'This created a serious bubble in certain sectors and a serious outflow of resources from others.'

Some asset managers see opportunities in cheaper stocks. Goldman Sachs has included Chinese AI companies in an updated list of recommendations. However, other investors prefer to wait for valuation declines.

Wang Zhou, a partner at Zhuozhu Investment Management in Shanghai, predicts that chip manufacturers and AI suppliers will face a price war, similar to what is happening in other industries in China. He noted: 'There are no exceptions. All bubbles inevitably burst.'

The film 'Sanxingdui: Future Past,' which runs for 100 minutes and was created using an end-to-end AI-driven workflow, premiered in Chinese cinemas on October 23rd. According to IT Home, this is the first film of its kind to receive public screening approval from the National Cinema Administration of China.

The film's production was carried out by Bona Film Group utilizing its proprietary Boka Film Cloud Studio platform. Over a period of more than two years, the team generated over 1.2 million base images and conducted more than a hundred full iterations of the film. The creators emphasize that every character is an original digital creation, and there are no digital copies of real actors in the movie.

Bona states that AI is primarily responsible for generation and execution, while ideas, script, shot design, and aesthetic judgments come from the AIGMS team of the company. The production process was organized according to the principles of a traditional film crew, involving about 100 people and 17 specialists, including screenwriters, directors, producers, production designers, cinematographers, lighting, sound, and editing specialists.

The plot unfolds in the future, where humanity has delegated all decisions to algorithms, triggering a global crisis. Clues to resolving this problem lie within seven ancient symbols from the Sanxingdui Bronze Age archaeological site located in Sichuan Province. The creators describe this structure as answers from the past and a crisis in the future.

The film's attendance has been modest. The publication National Business Daily reported low occupancy rates during the initial days of release. Specialists working in the AI content sector told the publication that long films created with AI still face challenges regarding consistency of characters, scenes, and details over 100 minutes, as well as image realism. One expert noted that viewers might perceive the AI-generated characters as artificial, hindering emotional connection. Another argued that the original script determines the final outcome: it is a content market, not a production market.

Bona announced that other AI-involved projects are in development, including the sci-fi animation 'Unplanned: Operation Guanghan,' which has not yet received a screening license. Other Chinese studios, such as Huayi Brothers and Huace, have also announced film and series projects utilizing AI. Currently, the film serves as a test to see if a complete AI-based production pipeline can create a picture that audiences will prefer over traditionally made films.

The first feature-length film entirely created using artificial intelligence (AI) premiered in Chinese cinemas on Friday. Due to low demand for advanced tickets, this film may pose a significant challenge to box office revenue in the country's rapidly growing technology industry.

According to ticketing platform 'Maoyan', over 10,000 screenings of the sci-fi thriller 'Sansindui: Past Future' were scheduled for Friday. However, audiences did not show much enthusiasm. According to 'Maoyan', preliminary sales reached only 65,000 yuan by Thursday evening (equivalent to $9,700 or 900,000 Indian rupees). It is projected that total box office collection will remain below 100,000 yuan, which constitutes only a small fraction of the film's stated production cost.

Jiang Defu, CEO of the production company 'Bona Film Group', admitted in a recent interview that the public reaction to the film was reserved. Nevertheless, he emphasized that the picture aims to explore new boundaries. He stated in the publication 'Julie' that they are the first to take such a step, receive permission for theatrical screening, and present their work to the audience for the first time.

'Bona Film Group' reported that creating this film took over two years of work by about 100 people, with costs exceeding 10 million yuan ($1.5 million, or 150 million Indian rupees). Despite this, the film failed to impress Iris Yang. She watched a free preview on Thursday and noted that given the quality of the picture, she would never pay for a ticket.

Yang added that if any AI-created film could provide a cinematic experience comparable to 'Avatar', she would be willing to consider buying a ticket. While AI-generated videos are gaining popularity in China, the world's second-largest economy, AI dramas on the Chinese version of TikTok, 'Douyin', were viewed over 200 billion times in September. Meanwhile, independent AI director Zhang Jun told AFP that the mere fact of creating a film with AI does not guarantee viewers' willingness to pay for it.

Chinese social media users are also not showing much interest in the appearance of AI films in theaters. One Weibo user commented that the film could become very popular if it were available to watch for free on streaming platforms, but people are not yet ready to pay for viewing.