Generative AI management rules are implemented and the era of large-scale models is coming.

Generative AI rules implemented, large-scale model era coming.

The “Interim Measures for the Management of Generative Artificial Intelligence Services” jointly issued by the Cyberspace Administration of China and seven other departments have established development norms for the generative AI industry in China.

The intention of this regulatory document is not only to control, but also to convey principles that promote industry development, especially emphasizing “encouraging innovative applications of generative AI technology in various industries and fields.”

The timing of the release of the new regulatory policy coincides with a cooling period in the AIGC frenzy. At this point, the emergence of various large models can no longer bring new sensory stimulation to the world. Although the upgrading of large models is still ongoing, the external demand for application scenarios has already prompted the arrival of the post-large model era.

Open Source Securities Research believes that gaming, e-commerce, and education will be the first tracks where generative AI will be transformed. When large models bring disruptive experiences in specific scenarios, the momentum of AI, which has shown signs of decline, will regain its charm.

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Rules for the management of generative AI will boost conceptual stocks

On July 13th, the Cyberspace Administration of China, together with the National Development and Reform Commission, the Ministry of Education, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, the Ministry of Public Security, and the National Radio and Television Administration, announced the “Interim Measures for the Management of Generative Artificial Intelligence Services” (referred to as the “Measures”), which will be implemented from August 15, 2023.

In China, after more than half a year of disorderly development, clear management regulations have been established for the research and development and services of generative AI, marking the end of the era of the AI industry in its infancy.

Cyberspace Administration releases generative AI management document

This regulatory document can be summarized by two key phrases: strengthening supervision and encouraging development.

In terms of supervision, the “Measures” specify that any service that provides generative text, images, audio, and video content to the Chinese public using generative AI technology must comply with the regulations. In other words, overseas generative AI applications that provide services to domestic users are also included in the scope of regulation.

The regulatory provisions have made detailed regulations on the research and development and service processes of generative AI.

In terms of content, it is prohibited to generate content that harms the country, promotes violence, pornography, falsehoods, and other content prohibited by laws and regulations. In terms of algorithm design, effective measures must be taken to avoid discrimination based on nationality, belief, gender, and other factors. In terms of rights and interests, respect for intellectual property rights is required, and the rights of others, such as the right to portrait and privacy, must not be infringed upon. In terms of service standards, providers should fulfill their obligations regarding network information security, take measures to prevent minors from becoming addicted to generative AI services, and not illegally collect users’ personal identity data, etc.

The above regulations have essentially drawn a line for the negative behaviors exposed by past generative AI. For example, the spreading of rumors using ChatGPT, infringement of intellectual property rights, and malicious incidents using tools to “swap faces” and “undress” will be strictly regulated in the future.

In addition to the necessity of regulation, the promotion of the benign development of generative AI is also emphasized in the “Measures.” The words “encourage” and “promote” appear multiple times in the document.

The regulatory authorities stated that they encourage the application of generative AI in various industries, encourage independent innovation of basic technologies such as algorithms, frameworks, and chips, and promote the construction of public training data resource platforms. At the same time, they also aim to promote the sharing of computing resources and improve the utilization efficiency of computing power.

Under the principle of strict regulation and promotion of development, China’s generative AI has entered a new stage of development. On the one hand, after the regulations are clarified, relevant companies can execute research and development more clearly and efficiently, accelerating the implementation of technology. On the other hand, the various incentive regulations of the new rules can also reduce costs and increase efficiency in the research and development of generative AI.

Globally, the European Union is advancing the final legislative process of its “Artificial Intelligence Act,” while the United States is expected to introduce a series of regulatory measures this summer, and Japan is expected to promulgate regulatory policies by the end of this year.

This domestic regulation is generally seen as beneficial to the development of the domestic generative AI industry, and the securities market reflects the expectations of the outside world.

After a few weeks of decline, AI concept stocks rebounded on July 14th, with 360, iFlytek, and KUNLUN World First rising by 2.46%, 2.71%, and 4.04% respectively, and Baidu rising by 2.35% in the US stock market.

China Securities Research Report stated that the development of artificial intelligence application layers is expected to be promoted, such as gaming, utility, and entertainment applications. At the same time, the policy also emphasizes the construction of generative AI infrastructure and public training data resource platforms, which is expected to drive the development of related companies in data, models, and other areas.

The era after large models: opening up “book” applications

In addition to the issuance of the “Measures” at the management level, many well-known technology companies are also participating in the formulation of standards for the development of the AI industry.

At the recently concluded 2023 World Artificial Intelligence Conference, the National Artificial Intelligence Standardization Overall Group, guided by the National Standardization Committee, announced that the Shanghai Artificial Intelligence Laboratory, together with companies such as Baidu, 360, Huawei, and Alibaba, jointly served as the leader of China’s first large model standardization special group and officially launched the formulation of national standards for large model testing.

According to the requirements, the above-mentioned units need to leverage their theoretical and practical experience in the field of large models to provide research topic recommendations for standardization in areas such as the software and hardware foundation of large models, key technologies, and industrial applications.

Regulatory standards and industry standards are being established almost at the same time, driving Chinese generative AI companies to transition to the “mainstream,” and potential competition and reshuffling will also unfold together.

Starting with the wave of large models sparked by ChatGPT, the arms race in large models among Chinese companies is particularly intense. According to the “Research Report on China’s Artificial Intelligence Large Model Map” released by Zhao Zhiyun, the director of the China Institute of Science and Technology Information in May this year, as of incomplete statistics, China has already released 79 large models with a parameter scale of more than 1 billion.

“The Battle of Large Models” is in full swing, but the excitement generated by large models is diminishing day by day. The industry expects AI companies to bring something different as regulatory authorities encourage the application of generative AI.

Although there is still a lot of room for optimization of large models, it is not an exaggeration to say that the post-large model era has arrived ahead of schedule. The current market is already tired of the output of repetitive large models, which means that the transformation of large models for existing business scenarios will become a new trend.

Which industries are likely to be the first to benefit from generative AI? Open Source Securities believes that gaming, e-commerce, and education are at the forefront.

The gaming industry, from production to subsequent player experiences, has the potential to be revolutionized by AI. Whether it is game plot design or character concept art, generative AI can significantly improve efficiency. Netease’s game “Justice” has also incorporated AI, allowing NPCs to have natural conversations with players and provide different interactive experiences. In the long run, generative AI will continue to enrich the content of games.

E-commerce is also a stage where AI can demonstrate its capabilities. Open Source Securities states that leading e-commerce platforms with user-generated content and data advantages can use large models to launch “AI shopping guides,” accelerating traffic and revenue growth. “AI + digital humans” have the potential to open up broader commercial opportunities.

In the field of education, generative AI technology will accelerate the growth of the youth AI training market. By combining massive teaching materials with large models, AI can become a teacher in a specific subject, creating a huge market space for AI-assisted teaching. For example, the driving school “Eastern Fashion” has already implemented AI instructors, who provide real-time voice guidance to students during driving lessons.

In addition, industries that focus on content production such as film, television, and media will continue to be transformed by generative AI. It is expected that in the future, there will be a large number of AI productivity tools based on large models for vertical industries, assisting humans in efficient content creation.

From focusing on large models to focusing on applications, the wave of generative AI will also flow from giant corporations to creative small and medium-sized companies. When large models are combined with creativity, new applications that are completely different from conversational chatbots may emerge, and more unique business stories are currently brewing.

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