AI industry shifts focus from model competition to commercial application and branding

The artificial intelligence industry is undergoing a strategic shift from a technical arms race focused on computing power and model parameters toward a focus on commercial application and brand positioning. As large language model (LLM) capabilities become increasingly commoditized and prices drop, the competitive landscape is moving toward business model reconstruction and ecosystem integration.

In China, the AI sector faces significant financial pressure, with estimated losses exceeding 18 billion yuan in 2025 and projected to surpass 20 billion yuan in 2026. Despite high capital expenditures from companies like ByteDance, the industry is transitioning from a ‘war of models’ to a ‘war of applications.’ One notable success in commercialization is the AI short drama industry, where video generation tools have reduced production costs by up to 90%.

Parallel to these shifts, Generative Engine Optimization (GEO) is emerging as a critical service for brands seeking visibility on AI platforms. Technical approaches in the Beijing market vary between semantic optimization, which builds brand knowledge graphs to align with LLM logic, and keyword matching, which utilizes traditional SEO-style methods to increase brand mentions.