Chinese startup MiniMax, working on AI solutions similar to that of Microsoft-backed OpenAI's ChatGPT, is close to completing a fundraising of more than $250 million that will value it at about $1.2 billion, people familiar with the matter said.

The deal comes amid a global AI buzz kicked off by ChatGPT that has spread to China, shoring up stocks in artificial intelligence firms and prompting a flurry of domestic companies, such as Alibaba, Huawei, and Baidu, to announce rival products.

MiniMax's latest fundraising drew in new investors such as an entity linked to technology giant Tencent, two people said, on condition of anonymity as the information was not public.

MiniMax and Tencent did not respond to a Reuters request for comment.

MiniMax was founded in 2021 by some former employees of SenseTime, including Yan Junjie - a former vice president at the Chinese AI firm, two other people said.

Its fundraising highlights growing investor interest in what could be China's answer to OpenAI, even as venture capital investment faces pressures in the country amid a teetering economic recovery and U.S. controls on chip exports.

Chinese regulators have proposed greater oversight of the emerging popular technology, with some investors and advisers predicting meaningful deal activity in the country's broader AI-generated content sector in the second half of this year.

Big tech companies are already pouring massive resources into developing their own AI models, while new startups headed by big-name entrepreneurs like MiniMax are also coming onboard.

Wang Huiwen, co-founder of on-demand service giant Meituan, said he has founded a new AI company called Beijing Lightyear Technology with $50 million from investors.

Google China's former chief, Kai-Fu Lee, has unveiled his new startup - Project AI 2.0. Wang Xiaochuan, founder of China's No.2 search engine Sogou, said in April that he had founded Baichuan Intelligence with a startup capital of $50 million.

MINIMAX'S GLOW

When starting out, MiniMax received funding from miHoYo, the maker of hit game "Genshin Impact", the two other people said, without providing further details.

Its other early investors include China's Yunqi Partners and Future Capital, statements from the venture capital funds show.

MiHoYo did not respond to a Reuters request for comment.

MiniMax's app, Glow, currently allows users to create virtual characters, give them background stories and then chat with them about topics ranging from relationship advice to how to deal with hair loss. MiniMax's AI model can also be used to solve a wide range of tasks.

MiniMax's technology has received positive feedback, said Charlie Chai, an analyst with 86Research.

"Kingsoft Cloud Group is working with both MiniMax and Baidu's ERNIE Bot for office productivity use cases. The feedback seems to favour MiniMax," Chai said.

"Of course, it was early-stage development, but the remarks were quite surprising to me since I held Baidu in high regard."

(Reporting by Roxanne Liu in Beijing and Josh Ye in Hong Kong; Editing by Himani Sarkar)