Investors are showing no signs of slowing down as they continue to inject billions of dollars into artificial intelligence (AI) startups as the AI race heats up. Just a few days ago, we covered the news about Amazon’s substantial move, when the retail behemoth revealed its massive $4 billion investment in the generative AI startup Anthropic. Now, another tech giant is joining the fray by investing in the AI chip startup Enflame.

Today, Enflame, an AI chip startup backed by Tencent, announced it has secured an impressive $274 million in funding from state-affiliated investors and other sources. The funding is a significant boost to China’s ambitions in the field of AI hardware and China’s effort to be self-sufficient in critical technologies in the wake of US sanctions on the country.

Enflame said that its latest fundraising round was co-led by investors including several funds backed by Shanghai International Group, which is controlled by the Shanghai municipal government’s asset regulation authority, Reuters reported. Tencent, which has partnered with Enflame to develop an AI chip called Zixiao and invested in the startup in the past, also participated in the latest round.

Enflame is part of a cohort of Chinese enterprises specializing in AI chips, specialized processors designed to enhance AI-related tasks. Their leading product, the Zixiao chip, has already found applications in various domains, including cloud computing, data centers, and smart devices.

This recent infusion of funds into Enflame underscores the robust investor confidence in the company and, by extension, in China’s AI chip sector as a whole. The investment will empower Enflame to expedite the development of innovative products and expand its footprint in emerging markets.

In addition, this transaction also shows the increasing influence of state-associated investors in China’s technology sector. In recent times, the Chinese government has actively encouraged state-owned enterprises and investment entities to assume more prominent roles in the technology domain, particularly in areas deemed strategically significant.

The backing of Enflame is anticipated to be viewed positively by the Chinese government as it contributes to reducing China’s dependence on foreign AI chips. The deal also shows the government’s commitment to fostering the growth of the domestic AI chip industry.