The US Treasury Department is reviewing Benchmark's $75 million investment in Chinese AI startup Manus, valued at $500 million, over compliance with 2023 restrictions on investing in Chinese technology companies. Manus AI specializes in building "wrappers" around existing AI models, making them more accessible and user-friendly for businesses and consumers.
The US government is concerned about China's AI development, particularly in areas like surveillance, defense, cybersecurity, and autonomous weapons. The 2023 restrictions prohibit or require notification for US investors funding Chinese companies in critical tech sectors, including AI. Manus's structure has raised questions, with its incorporation in the Cayman Islands potentially not being enough to exempt it from these restrictions.
Benchmark's legal team argued that Manus doesn't create its own foundation models, instead building wrappers around existing platforms, and emphasized its incorporation in the Cayman Islands as proof it's not a "China-based" company. However, the Treasury Department is scrutinizing the investment, highlighting the complexities of navigating regulatory requirements in the AI sector.
This review has significant implications for the industry, with startups touching AI, quantum tech, biotech, or semiconductors facing stricter vetting. Investors must reassess where they deploy capital, considering regulatory survivability alongside return on investment. The outcome of this review will likely shape the future of US investment in Chinese tech companies.
