Li Ka-shing layout large model

Original: Zhao Jinjie

**Source: **Alphabet List

When real estate developers clamor to transform into the technology field, it is often when their core real estate business is in crisis. In order to find a new growth curve, in 2018, Xu Jiayin officially entered new energy vehicles by investing in Jia Yueting's Faraday Future, and then embarked on the road of independent vehicle manufacturing; in the same year, Yang Guoqiang began to invest in the research and development of construction robots and the creation of a high-tech agricultural ecosystem.

However, their high-tech transformation strategies failed to work. Evergrande Automobile was repeatedly involved in production suspensions, and Country Garden's two major technology transformation businesses are still in the implementation stage. Evergrande and Country Garden, which cannot wait for help, will face thunderstorm moments in 2021 and 2023.

Compared with Hui Jiayin and Yang Guoqiang, Li Ka-shing, who also started his career in real estate, has been able to successfully survive the real estate downturn cycles one after another, largely due to the success of high-tech transformation. Although Li Ka-shing has also suffered losses due to his investments in Yangtze Motor and WM Motor in the field of new energy vehicles, new energy vehicles are not all of Li Ka-shing's high-tech transformation strategy.

From his early bets on the telecommunications industry to his investments in star companies in the technology field such as Skype, Facebook (now Meta), Spotify, and Zoom, Li Ka-shing has made outstanding achievements in the process of high-tech transformation.

Li Ka-shing

After the rise of the large model wave, Li Ka-shing did not fall behind. Recently, Li Ka-shing led a $97 million Series B round of financing for edge AI computing company Kneron. Kneron said that the funds will be used to accelerate the advancement of advanced AI, with a special focus on lightweight GPT solutions in the automotive field.

Currently, most GPT models run in cloud data centers, which leads to problems such as high latency, high transmission data costs, and insufficient user privacy and security protection. Directly installing lightweight GPT solutions on device terminals is considered to be one of the ways to solve the above problems. First, this is also the development direction of large-scale models that many mobile phone chip manufacturers and brands such as Qualcomm, Huawei and Xiaomi are optimistic about.

In Li Ka-shing's view, "AI is changing the world... Vigorously promoting the effective application of AI is indispensable." This has been reflected in Kneron. In order to promote the rapid implementation of AI applications, Li Ka-shing has previously led investments in Kneron twice in 2018 and 2022 respectively.

A

Kneron is not the first large model company that Li Ka-shing has invested in. As early as 2012, before the large-scale model craze took off, Li Ka-shing invested in DeepMind, a star company in the current large-scale model track. At this time, DeepMind became famous with its AlphaGo defeating the Go world champion Lee Sedol in a human-machine battle. Four years.

Among the well-known entrepreneurs who participated in the DeepMind financing plan in 2012 was Musk, who invested US$5 million in DeepMind. As DeepMind was acquired by Google for US$400 million in January 2014, both Li Ka-shing and Musk made considerable profits from it.

Musk

Li Ka-shing said that it is a rare fate to participate in the early investment of DeepMind. Although Musk and DeepMind parted ways, the fate between Li Ka-shing, DeepMind and Musk has not ended.

Three years after withdrawing from the list of DeepMind shareholders, Li Ka-shing met with Demis Hassabis and Mustafa Suleiman, the two founders of DeepMind, in Hong Kong in May 2017. On that day, Li Ka-shing put on a studious look, prepared paper and pen, and listened to the two men explaining the AI research direction and the stage results of various applications.

When Mustafa Suleiman and others jointly founded the large-scale model startup Inflection AI in 2022, Li Ka-shing successfully grabbed the first batch of investment quotas. The list of start-up funds of up to US$225 million included Microsoft , top venture capital Greylock, Bill Gates, former Google Chairman Eric Schmidt, former Meta CTO Mike Schroepfer, etc.

In July 2023, Inflection AI completed a new round of financing of US$1.3 billion, with its valuation reaching US$4 billion in one fell swoop, making it the third largest generative AI unicorn in the world after OpenAI and Anthropic.

In the new wave of AI technology driven by large models, Li Ka-shing’s investment in AI has also increased. Entering 2022, more than 70% of Li Ka-shing's investment projects are related to AI, including the robotics company Promise Robotics, Cortical Labs, Deepcell, Kangaroo Health, etc. in the biomedical field.

As the AI investment landscape continues to expand, Li Ka-shing has begun competing in the same track with Musk, who was also an investor in DeepMind in the past.

In April this year, Li Ka-shing led a $10 million investment in AI company Cortical Labs, a developer of living neural implant chip technology dedicated to developing new artificial intelligence using human neurons.

What Cortical Labs is doing is on the same track as Neuralink, a brain-computer interface company owned by Musk. Five months after Cortical Labs completed its financing, Neuralink announced that it had received human trial approval from the U.S. Food and Drug Administration (FDA) and would conduct the first human trial.

B

Behind Li Ka-shing's bet on AI is his long-standing emphasis on new technological changes.

In 2013, Li Ka-shing, who was 85 years old at the time, said that he was deeply interested in new technologies, and his exposure to new technologies also made him feel younger. “The industrial revolution in the 18th century began in the United Kingdom; the 21st century is a technological revolution, and it will Several industries, including defense industry, agriculture, water conservancy, energy, medical care, life science and technology, telecommunications, Internet, etc., have experienced breakthrough developments, and investment opportunities are endless."

After making his first pot of gold with plastic flowers and starting his fortune with the help of real estate, Li Ka-shing was the first to focus on investment opportunities in the technology field, which was the telecommunications industry.

After predicting the imminent arrival of 2G wireless communication technology, Li Ka-shing invested heavily through Orange in 1993, becoming the third largest service provider in the British telecommunications market. By 2000, Li Ka-shing sold Orange to French telecom giant France Telecom for US$37.5 billion, setting a record for the world's largest telecom transaction at the time.

Later, in an exclusive interview with Caixin, Li Ka-shing said frankly, "The sale of Orange has become one of the most successful major transactions of our company."

It was precisely by relying on the operation of buying first and then selling in telecommunications investment that Li Ka-shing surpassed the "Hong Kong No. 1 Brother Li Shau Kee" at that time and became the new richest man in Hong Kong.

The successful investment experience in the telecommunications industry has amplified Li Ka-shing's enthusiasm for technology investment. In 2002, at the age of 74, Li Ka-shing founded Horizon Investment, a venture capital institution focused on investing in high-tech projects, and handed it over to his confidante Zhou Kaixuan to manage it.

When evaluating Li Ka-shing's venture capital philosophy, Zhou Kaixuan commented that "he likes disruptive innovation." And like SoftBank's Masayoshi Son, both of them made decisions very quickly.

In 2007, when Zhou Kaixuan recommended investing in Facebook (now renamed Meta) to Li Ka-shing, Li Ka-shing made the investment decision in just 5 minutes. Although Facebook had not yet achieved profitability at the time, its huge user base and mobile development plans allowed Li Ka-shing to see the potential for disruptive change.

From 2007 to 2008, Horizons Investment invested US$60 million in Facebook respectively, for a total of US$120 million. By the time Facebook went public in 2012, Li Ka-shing had reaped a fivefold return on this investment.

As for the reasons for making investment decisions quickly, Li Ka-shing once gave an explanation, believing that "most Internet startups lack income, let alone profitability. Investors just buy an attractive concept, and 5 minutes is probably the upper limit for explanation."

Before profiting from Facebook, Horizons Investment had already made a name for itself by winning the instant messaging software Skype in 2005. After that, Zhou Kaixuan led Victoria Harbor Investment to successively invest in industry star companies such as online streaming music service platform Spotify and voice assistant Siri, becoming a well-known venture capital institution in the industry.

The investment in Zoom is undoubtedly a major masterpiece of Victoria Harbor Investment in recent years.

In the story disclosed by Zhou Kaixuan to Caixin, one of the reasons why Li Ka-shing decided to invest in Zoom came from his personal pain points. In 2013, Li Ka-shing's senior executives asked for HK$20 million to purchase advanced video conferencing hardware equipment. "At that time, Mr. Li (Li Ka-shing) was frightened and was so angry that he was so angry. When he knew that we had invested in Zoom, a cloud-based, focused No one is happier than he is when it comes to enterprise services and easy-to-use, low-cost software.”

That year, Li Ka-shing's Horizons Investment invested US$6.5 million to participate in Zoom's Series B financing, and in 2015 it invested an additional US$30 million to participate in Zoom's Series C financing.

During the epidemic, the emergence of new changes in working remotely, such as working from home, has led to explosive growth in demand for Zoom, and its market value has also skyrocketed. By October 2020, Zoom's stock price reached its peak, with a market value of more than 150 billion U.S. dollars. At this time, the market value of Zoom shares held by Li Ka-shing was close to 11 billion U.S. dollars. At that time, Li Ka-shing's net worth was US$32.6 billion, which meant that he earned back about 1/3 of his net worth from the investment income of Zoom alone.

But Li Ka-shing did not choose to sell at a high point. According to regulatory documents, Li Ka-shing reduced his holdings of 2.9 million shares of Zoom between March 2022 and December 2022, and currently still holds approximately 4.33% of Zoom’s shares. As of press time, Zoom's market value has dropped by more than 80%, leaving only US$19.5 billion.

It is worth mentioning that Horizons Investment also invested in Musk’s underground tunnel company The Boring Company in 2019.

C

It’s not just the Zoom stock held by Li Ka-shing that has fallen into decline. The real estate industry where Li Ka-shing started his business has also entered a new downturn cycle again.

Domestic real estate giants such as Sunshine City, Tahoe, Sunac, Country Garden, and Evergrande have frequently been hit by debt problems.

In order to stimulate sales and raise funds, in August 2023, Li Ka-shing's Cheung Kong Group's new real estate "Qinhai Station II" in Hong Kong began to sell houses at a price reduction of as much as 30% off.

Li Ka-shing's low-price selling action further triggered the outside world's expectations of downward pressure on the property market. Some analysts believe that Li Ka-shing may be trying to reduce his position in this sale to recover funds, and there may be other projects with better return on investment than real estate.

Obviously, the investment in AI technology represented by large models is becoming a new investment project that Li Ka-shing sees as being able to outperform real estate.

Li Ka-shing, who is well aware of the cyclical development characteristics of real estate and has personally experienced many financial crises, uses diversified layout to disrupt and reorganize his assets in advance during every downturn in the real estate industry. Investing in cutting-edge technology is only one of the means.

Before cutting prices to promote Hong Kong real estate, Li Ka-shing has successively sold a number of overseas businesses in the past two years, involving office buildings, communications, aircraft leasing and other fields. The transaction amount involved reached 100 billion Hong Kong dollars, including in March 2022, Cheung Kong Group announced The 5 Broadgate Building property in London, England, was sold for a transaction consideration of approximately 6.033 billion yuan; in April 2022, Cheung Kong Group completed the overall sale of the aircraft leasing business, with a transaction price of approximately HKD 33.2 billion, and a book profit of approximately HKD 1.3 billion.

Earlier, Li Ka-shing also put Husky Energy Company and the telecommunications infrastructure business in the European market on the shelves one by one.

Ten years ago, Li Ka-shing withdrew capital from the mainland, invested heavily in the United Kingdom and other European countries, and reorganized and allocated assets. It seems like it happened yesterday.

In 2013, Li Ka-shing's investment in the mainland market reached its peak. In that year, the income from the mainland once accounted for 50% of the entire Li Group. In August of that year, Li Ka-shing sold off Guangzhou Xicheng Metropolis Plaza, which he bought in 1997, for about 3 billion yuan. Li Ka-shing's divestment path began. The mainland commercial real estate assets he sold included: Guangzhou Xicheng Metropolis Plaza, Shanghai Oriental Plaza Economic Center, Nanjing Financial Center Building, Beijing Yingke Center, Guangzhou International Toy City, Beijing Roosevelt Plaza, Shanghai Century Plaza, etc.

According to incomplete statistics, since cashing out in 2013, Li Ka-shing has withdrawn more than HK$100 billion from the real estate sector. During the same period, Li Ka-shing spent nearly HK$147.9 billion on overseas acquisitions.

In wiping out the nearly HK$50 billion gap between withdrawn funds and overseas acquisitions, the high returns brought by technology investment have undoubtedly contributed a lot to Li Ka-shing.

Facing a new round of real estate downturn, AI is becoming an important weight in Li Ka-shing's asset restructuring and allocation table.

References:

"Exclusive Interview with Li Ka-shing: "I will not earn the last copper penny"" Southern Weekend

"The truth about Li Ka-shing's return to the mainland market" Finance Eleven

"Li Ka-shing is not Xu Jiayin's white knight" China Entrepreneur Magazine

"The most profitable super unicorn this year is here" China Investment Network

"Li Ka-shing wins again" Gelonghui