(Bloomberg) -- SenseTime Group Inc.’s stock soared its most in more than two years after releasing the latest version of its SenseNova generative AI model, highlighting the intense interest surrounding China’s efforts to develop artificial intelligence.

The shares gained as much as 36% after the company revealed SenseNova 5.0 during its Tech Day event in Shanghai. The ChatGPT-like platform has “significantly” improved in terms of linguistic and creative capabilities, Chairman Xu Li said in a statement. Trading in the stock was suspended after the abrupt surge but will resume Thursday.

SenseTime is among a growing number of Chinese corporations and startups exploring ways to develop an answer to OpenAI’s ChatGPT. In 2023, it joined Baidu Inc. and Alibaba Group Holding Ltd. in developing its own inhouse generative AI platform. The potentially transformative technology has since become a key area in which Beijing is encouraging local companies to compete with their US counterparts.

The company said in a filing it was unaware of any reasons for the dramatic share price surge apart from SenseNova 5.0, which comes with about 600 billion parameters. “It achieved significant improvements in knowledge, mathematics, reasoning and coding capabilities, and its performance is generally comparable to GPT-4 Turbo,” the company said in the filing. 

SenseTime’s Wednesday rally may stem in part from a depressed valuation. The company, once celebrated as a leader in the Chinese AI arena, has shed more than 80% of its market value since a 2021 IPO, after the US sanctioned the firm much like it did Huawei Technologies Co. The abrupt death of a co-founder last year also rattled investors.

“There’s very little detail to warrant such a move other than the fact that expectations are very low and the stock is oversold,” said Vey-Sern Ling, a managing director at Union Bancaire Privee. “There are barely any fundamentals to rely on.”

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SenseTime touted its AI model’s ability to create both text and visual content, not unlike OpenAI’s Sora. It also cited benchmarks to emphasize SenseNova 5.0’s improvements over the previous iteration. 

SenseTime, once a leader in AI-powered facial recognition, stepped up efforts in generative AI after apps from ChatGPT to Sora roused the global tech industry. It launched the first SenseNova in April 2023, and was among the earliest batch of Chinese companies to win government approval to roll out services to the public.

The company is trying to reverse a dramatic slowdown in growth in the face of rapidly intensifying domestic competition and geopolitical tensions. The US government blacklisted the company in 2019 on allegations related to human rights violations in Xinjiang. That restricted its access to capital and crucial US tech components, compounded by curbs on the sale of advanced AI chips and chipmaking equipment to Chinese firms.

Short-seller Grizzly Research in 2023 accused the firm of inflating revenues, which SenseTime denied. Its stock remains one of the most shorted tech plays in Hong Kong, according to S&P Global data. Short interest accounted for more than 10% of SenseTime’s free floating shares, which touched a record low Friday.

“The AI craze has never faded in China, and it is regarded as an important part that can stimulate China’s technological revolution and promote productivity,” said Shen Meng, a director at Chanson & Co. “However, China’s big models lack both computing support and academic research innovation, and many companies rely on marketing to keep it as a hot topic.”

(Updates with analyst’s comments from the fourth paragraph)

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