Chinese artificial intelligence companies Z.ai and MiniMax are projected to continue operating at a loss through 2030, according to Macquarie Group’s Asia internet and software research lead, Ellie Jiang. This reflects the substantial costs tied to computing infrastructure and model development amid tight US export controls on advanced processors.
- Z.ai and MiniMax expected to incur losses until 2030 despite rising revenues.
- High costs driven by scarce computing power and US export restrictions.
- Investment bank favors cloud giants Alibaba and ByteDance over standalone AI labs.
What happened
Macquarie Group’s head of Asia internet and software research, Ellie Jiang, indicated that Chinese AI companies Z.ai (Zhipu AI) and MiniMax could remain unprofitable until at least 2030. This assessment arises despite strong growth in their annual recurring revenue, with Z.ai targeting nearly $3 billion ARR and MiniMax reaching $800 million by August 2026. However, the costs associated with training and running advanced AI models, including investments in computing infrastructure, continue to outweigh these gains.
The companies face a pronounced domestic shortage of computing power crucial for AI development, worsened by US export controls limiting access to Nvidia’s most advanced processors. This scenario creates a so-called 'compute crunch' in China that is estimated to be two to three times more severe than the global average. Both firms continue to push heavy investments into research, model training, and infrastructure at the expense of short-term profits.
Why it matters
The persistent losses underline the financial challenges for standalone Chinese AI labs competing at the technological frontier. Analysts point out that while revenue from subscriptions and enterprise deployments is growing, these streams are not yet sufficient to cover escalating operational and R&D costs. This situation fuels skepticism about the long-term viability of pure AI model developers compared to integrated cloud service providers.
Investment research suggests that major players like Alibaba and ByteDance hold competitive advantages through stronger computing capabilities, diversified monetization options, and deeper capital resources. These cloud giants are seen as better positioned to capitalize on the AI wave, whereas isolated AI firms face pressure to justify ongoing high expenditures. Despite this, monetization mechanisms for AI continue to improve, and growing API usage and commercial licensing offer pathways to future profitability.
What to watch next
Future developments will focus heavily on how Z.ai and MiniMax manage their computing resource challenges and investment pacing amid the domestic compute shortage. Observers will also track whether revenue growth through diverse channels such as APIs, enterprise solutions, and licensing can expand enough to offset ongoing losses. Any regulatory shifts that ease access to cutting-edge processors could materially impact their cost structures and timelines.
Additionally, investor sentiment will be closely monitored as valuation models try to balance accelerating ARR against durable losses. Emerging alternative performance metrics beyond ARR may become more prominent as the market matures. The ability of these firms to innovate in both AI applications and business models while navigating geopolitical constraints will be key indicators of their future competitiveness in the global AI arena.