Original: Zhao Jinjie

Source: Alphabet List

When real estate developers shout about transitioning to the technology field, it often coincides with their core real estate business being in crisis. In search of new growth curves, in 2018, Xu Jiayin officially entered the new energy vehicle industry by investing in Jia Yueting's Faraday Future, and then embarked on the path of independent car manufacturing; in the same year, Yang Guoqiang began investing in construction robot research and development as well as creating a high-tech agricultural ecosystem.

However, the high-tech transformation strategies of both individuals have not been effective. Evergrande Auto has repeatedly been embroiled in production stoppages, and the two major technological transformation businesses of Country Garden are still in the landing stage. Evergrande and Country Garden, without help, successively encountered a crisis in 2021 and 2023.

Compared to Xu Jiayin and Yang Guoqiang, Li Ka-shing, who also started with real estate, has benefited from the successful high-tech transformation behind his ability to smoothly traverse the real estate downturns time and time again. Although he suffered losses due to investments in Changjiang Auto and Weimar Auto in the field of new energy vehicles, new energy vehicles are not the entirety of Li Ka-shing's high-tech transformation strategy.

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

Li Ka-shing

After the rise of the big model wave, Li Ka-shing did not fall behind. Recently, Li Ka-shing led a $97 million Series B financing for edge AI computing company Kneron. Kneron stated that this funding 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, leading to problems such as high latency, high data transmission costs, and inadequate user privacy protection. Directly embedding lightweight GPT solutions in terminal devices is considered one way to solve these problems, and it is also a development direction favored by numerous mobile chip manufacturers and brand owners such as Qualcomm, Huawei, and Xiaomi.

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

Kneron is not the first big model company that Li Ka-shing has invested in. Back in 2012, before the big model craze had emerged, Li Ka-shing invested in the star company DeepMind, four years before DeepMind gained fame with its AlphaGo defeating Go world champion Lee Sedol in the man-machine Go battle.

Other well-known entrepreneurs who participated in the 2012 DeepMind financing plan included Musk, who invested $5 million in DeepMind at the time. With DeepMind being acquired by Google for $400 million in January 2014, both Li Ka-shing and Musk reaped substantial profits from it.

Musk

Li Ka-shing stated that being able to participate in the early investment in DeepMind was a valuable opportunity. Although Musk and DeepMind went their separate ways, the connection between Li Ka-shing and DeepMind, as well as Musk, has not yet dissipated.

Three years after exiting the DeepMind shareholder list, in May 2017, Li Ka-shing met with DeepMind's two founders, Demis Hassabis and Mustafa Suleyman, in Hong Kong. That day, Li Ka-shing appeared eager to learn, with pen and paper ready, listening to the two explain the research direction of AI and the stage achievements of various applications.

By 2022, when Mustafa Suleyman and others jointly founded the big model startup company Inflection AI, Li Ka-shing successfully secured the first batch of investment quotas. In this whopping $2.25 billion seed funding list, there are also Microsoft, top venture capital firm Greylock, Bill Gates, former Google chairman Eric Schmidt, and former Meta CTO Mike Schroepfer.

In July 2023, Inflection AI completed a new round of $1.3 billion financing, with a valuation reaching $4 billion, becoming the world's third-largest generative AI unicorn, second only to OpenAI and Anthropic.

In the new wave of AI technology driven by big models, Li Ka-shing's frequency of investments in AI has also increased. In 2022, over 70% of the investment projects initiated by Li Ka-shing were related to AI, including robotics company Promise Robotics, and biomedicine companies such as Cortical Labs, Deepcell, and Kangaroo Health.

As the landscape of AI investment continues to expand, Li Ka-shing has entered into competition in the same field as Musk, who was also an investor in DeepMind.

In April of this year, Li Ka-shing led a $10 million financing for the AI company Cortical Labs, which is a developer of living neural implant chip technology dedicated to developing new artificial intelligence.

What Cortical Labs is doing is in the same field as Neuralink, a brain-machine interface company under Musk. Five months after Cortical Labs completed its financing, Neuralink announced that it had obtained approval from the US Food and Drug Administration (FDA) for human trials and would conduct its first human trial.

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

In 2013, at the age of 85, Li Ka-shing expressed deep interest in new technology, and his exposure to new technology made his mindset younger. "The 18th-century Industrial Revolution began in England; the 21st century is a technological revolution, with breakthrough developments in many industries including defense, agriculture, water conservancy, energy, medical care, life sciences, telecommunications, the internet, and more, with endless investment opportunities and overwhelming demand."

After making his first fortune with plastic flowers and then starting in real estate, Li Ka-shing's first investment opportunity in the technology field was in the telecommunications industry.

Anticipating the arrival of 2G wireless communication technology, in 1993, Li Ka-shing made a major investment through Orange, becoming the third-largest service provider in the UK telecommunications market. By 2000, Li Ka-shing sold Orange to the French telecommunications giant France Telecom for $37.5 billion, setting a record for the largest telecommunications transaction in the world at the time.

Later, in an interview with "Caixin," Li Ka-shing admitted, "The sale of Orange was one of the most successful major transactions for our company."

It was through the successful investment experience in the telecommunications industry that Li Ka-shing surpassed "Hong Kong's No. 1 Li Zhaoji" at the time, becoming the new richest man in Hong Kong.

The successful investment experience in the telecommunications industry amplified Li Ka-shing's enthusiasm for technology investment. In 2002, at the age of 74, Li Ka-shing founded Horizon Ventures, a venture capital firm focused on investing in high-tech projects, and entrusted it to his confidante, Solina Chau, to manage.

When evaluating Li Ka-shing's venture capital investment philosophy, Solina Chau commented, "He likes disruptive innovation." Like SoftBank's Masayoshi Son, both of them make decisions quickly.

In 2007, when Solina Chau recommended investing in Facebook to Li Ka-shing, it took Li Ka-shing only 5 minutes to make the investment decision. Although Facebook was not yet profitable at the time, its large user base and mobile development plans made Li Ka-shing see the potential for disruptive change.

In 2007 and 2008, Horizon Ventures invested a total of $120 million in Facebook. By the time Facebook went public in 2012, Li Ka-shing had already reaped a fivefold return on this investment.

Li Ka-shing once explained the reason for making investment decisions quickly, stating that "most internet startups lack revenue, let alone profit. Investors are buying an attractive concept, and the explanation probably has a time limit of 5 minutes."

Before profiting from Facebook, Horizon Ventures had gained some fame by investing in the instant messaging software Skype in 2005. After that, under the leadership of Solina Chau, Horizon Ventures successively invested in industry star companies such as the online streaming music service platform Spotify and the voice assistant Siri, establishing itself as a well-known venture capital firm in the industry.

The investment in Zoom undoubtedly represents one of Horizon Ventures' major works in recent years.

In a story revealed by Solina Chau to "Caixin," one of the reasons Li Ka-shing decided to invest in Zoom was due to his personal pain point. In 2013, Li Ka-shing's executives requested to spend HK$20 million to purchase advanced video conferencing hardware, "which shocked Mr. Li (Li Ka-shing) and made him 'fuming with anger.' When he found out that we had invested in Zoom, a low-cost software that could be cloud-based, focused on enterprise services, and easy to use, no one was happier than him."

In that year, Horizon Ventures, under Li Ka-shing, invested $6.5 million in Zoom's Series B financing, and in 2015, it added $30 million in Zoom's Series C financing.

During the pandemic, the emergence of new changes such as remote work from home has led to an explosive growth in demand for Zoom, and its market value has also soared. By October 2020, Zoom's stock price reached its peak, with a market value exceeding $150 billion, and the value of Li Ka-shing's Zoom shares was close to $11 billion. At that time, Li Ka-shing's net worth was $32.6 billion, which means that the returns from this investment alone accounted for about one-third of his personal net worth.

However, Li Ka-shing did not choose to sell at the peak. According to regulatory filings, from March 2022 to December 2022, Li Ka-shing reduced his holdings of Zoom by 2.9 million shares, and currently holds approximately 4.33% of Zoom. As of the time of writing, Zoom's market value has fallen by more than 80%, to only $19.5 billion.

It is worth mentioning that Horizon Ventures also invested in Elon Musk's tunneling company, The Boring Company, in 2019.

Not only the Zoom stocks held by Li Ka-shing, but also the real estate industry, which Li Ka-shing relied on to start his career, has once again entered a new downturn cycle.

Sunac, Tahoe, Sunac, Country Garden, and Evergrande, among other domestic real estate giants, have frequently encountered debt problems and defaults.

In order to stimulate sales and recoup funds, in August 2023, Li Ka-shing's Cheung Kong Group began selling units in its new Hong Kong development "The Harbourside II" at a discount of 30%.

Li Ka-shing's move to sell at a low price has further ignited expectations of downward pressure on the real estate market, and some analysts believe that this sell-off may be a way for Li Ka-shing to reduce his holdings and recover funds, possibly with other investment projects offering returns that outperform real estate.

Clearly, the addition of big models and other AI technologies is becoming an important weight in Li Ka-shing's asset restructuring and allocation.

With a deep understanding of the cyclical nature of the real estate industry and having personally experienced multiple financial crises, Li Ka-shing, through diversified layouts, has always been able to disrupt and reorganize his assets ahead of time during each real estate downturn, with investment in cutting-edge technology being just one of the means.

Before the discounted sale of the Hong Kong property, Li Ka-shing had sold off several overseas businesses over the past two years, involving office buildings, telecommunications, and aircraft leasing, with transaction amounts reaching hundreds of billions of Hong Kong dollars. This includes the announcement in March 2022 that Cheung Kong Group sold the property at 5 Broadgate in London for approximately HK$6.033 billion, and the completion of the overall sale of the aircraft leasing business in April 2022 for approximately HK$33.2 billion, with a book profit of approximately HK$1.3 billion.

Earlier, Li Ka-shing also shelved Husky Energy and the telecommunications infrastructure business in the European market.

Ten years ago, Li Ka-shing withdrew funds from the mainland and made large-scale investments in the UK and other European countries, reorganizing and allocating assets. In 2013, Li Ka-shing's investment in the mainland market reached its peak, with income from the mainland accounting for 50% of the entire Li Ka-shing Group. With the sale of commercial real estate assets in the mainland, including West City Hui Square in Guangzhou, Oriental Huijing Center in Shanghai, Financial Center Tower in Nanjing, Yingke Center in Beijing, International Toy City in Guangzhou, Roosevelt Plaza in Beijing, and Century Hui Square in Shanghai, Li Ka-shing's withdrawal from the mainland real estate market began, and incomplete statistics show that since cashing out in 2013, Li Ka-shing has withdrawn over HK$100 billion from the real estate sector, while during the same period, he spent nearly HK$147.9 billion on overseas acquisitions.

In the nearly HK$50 billion gap between recouping funds and overseas acquisitions, the high returns from technology investments undoubtedly made a significant contribution to Li Ka-shing.

Faced with a new downturn cycle in the real estate industry, AI, represented by big models, is becoming an important weight in Li Ka-shing's asset restructuring and allocation.

References:

"Exclusive Interview with Li Ka-shing: 'I won't go after the last penny'" Southern Weekend

"The Truth about Li Ka-shing's Return to the Mainland Market" Caixin Eleven

"Li Ka-shing is not Xu Jiaying's White Knight" China Entrepreneur Magazine

"The Most Aggressive Super Unicorn in Fundraising This Year" 36Kr

"Li Ka-shing Wins Again" Gelonghui

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