Z.ai executives attend a listing ceremony at the Hong Kong Stock Exchange.
KANE WU/Reuters
The angst over China's latest AI models is missing an important business fact: "open weight" AI is not the same thing as open-source software.Open-source software, where the code is freely shared, can be an amazing business. Think Red Hat, which IBM bought for $34 billion. Open-weight AI models are different — and, so far, they're proving to be a terrible business. Take Z.ai, also known as Zhipu. It's publicly traded, so we can see its finances. Last year, the Chinese company lost almost $500 million on revenue of about $107 million.Zhipu is the lab behind GLM 5.2, an open-weight AI model that wowed the industry when it launched last month. You might expect the stock to have soared. Instead, Zhipu shares have plunged more than 40% over the past month.MiniMax, one of the only other independent Chinese AI labs that's publicly traded, lost $250 million last year on revenue of just $79 million. Its shares have fallen more than 50% in the past month."Open-weight models have a challenging path to making a profit," William Blair analyst Arjun Bhatia wrote in a recent note to investors, in the understatement of the year.Open-weight AI isn't open-source softwareThe key difference comes down to economics.
