In the rapidly evolving world of artificial intelligence (AI), Japanese startup Preferred Networks is positioning itself as a formidable challenger to industry giant NVIDIA. As AI technologies become increasingly integral to various sectors, Preferred Networks aims to carve out its niche by focusing on practical applications that address real-world problems.
Founded with the vision of harnessing AI to solve pressing issues, Preferred Networks has garnered attention for its innovative approaches in areas such as logistics, healthcare, and robotics. According to Daisuke Okanohara, Chief Executive Researcher at the company, "In the last 10 years, we have been working on using AI to solve real-world problems." This commitment to addressing tangible challenges sets the startup apart in a competitive landscape dominated by established players.
Preferred Networks has gained significant backing from notable investors, most prominently Toyota, which invested 1 billion yen in 2015, followed by an additional 10.5 billion yen in 2017. This financial support underscores the confidence major corporations have in the startup's potential to innovate within the AI space.
In December 2024, the company successfully raised 19 billion yen in a funding round aimed at bolstering its development of AI semiconductors. This move is crucial as the demand for advanced AI chips continues to grow, particularly with the increasing reliance on AI technologies across various industries.
One of the key initiatives of Preferred Networks is its joint venture with Mitsui & Co., focused on autonomous driving technologies for trucks. The collaboration aims to tackle the pressing issue of long working hours faced by truck drivers in Japan, where the shortage of drivers has become a significant challenge. Toru Nishikawa, CEO of Preferred Networks, explained, "The problem in the logistics world is that working hours are extremely long. You have to drive many hours, sometimes late into the night. However, in Japan, the number of truck drivers is decreasing." This venture reflects the startup's commitment to developing solutions that not only leverage AI but also address critical societal issues.
In addition to its partnership with Mitsui, Preferred Networks announced another joint venture in December 2024 with Mitsubishi and Internet Initiative Japan (IIJ) to explore opportunities in AI cloud computing. This collaboration aims to enhance the capabilities of cloud-based AI solutions, further expanding the company's reach and impact.
Despite its ambitious projects, Preferred Networks faces challenges in translating its technological advancements into profitability. Okanohara acknowledged that while achieving user success with AI solutions can be relatively straightforward, applying these technologies to solve real-world problems requires more time and effort. "It is relatively easy to achieve successes with users," he noted, emphasizing the complexity of real-world applications.
Nishikawa anticipates that it may take several years for the company's technologies to generate revenue, particularly in sectors like AI-based materials research. He estimates a timeframe of up to five years before these innovations are market-ready. "Initially, we start with joint research with companies and then assess whether the technology can be commercialized or not. Once we determine that it can be marketed, we work on developing services and products to offer to customers," he explained.
Looking ahead, Preferred Networks has its sights set on the international market, recognizing the limitations of operating solely within Japan. Nishikawa stated, "We have realized that there are limits to what we can do in Japan alone, and the global market is much larger than the Japanese market." This strategic shift is crucial as the company seeks to compete on a broader scale.
As part of its growth strategy, Preferred Networks is also planning for an initial public offering (IPO) in the future. Okanohara indicated that the IPO would likely occur when the company requires substantial funding to introduce its hardware products, such as semiconductors, to the global market. He projects a timeline of three to five years for this potential IPO, aligning with the company's broader growth objectives.
Meanwhile, NVIDIA continues to navigate its own challenges in the competitive AI landscape. Recently, the company's stock displayed contradictory signals, having fallen to a six-month low of 107 USD before rebounding by 13 percent to close at 121.41 USD, the highest in over two weeks. Market observers noted this volatility as part of a broader trend, emphasizing the classic investment strategy of "buying the rumor, selling the news."
In a significant development, NVIDIA secured a contract to establish Africa's first AI factory in South Africa, set to commence operations by June 2025. This initiative aims to expand access to cutting-edge AI technology for businesses and research institutions across the continent, with plans for future expansions into Egypt, Kenya, Morocco, and Nigeria.
Additionally, NVIDIA is collaborating with Borealis Data Center to develop Exascale-Clusters in Iceland and Europe. These data centers will operate entirely on renewable energy, leveraging the cold climate and hydropower for sustainable operations. With the European AI data center market projected to reach 29.8 billion USD by 2026, NVIDIA is positioning itself at the forefront of AI research and innovation on the continent.
As the AI landscape continues to evolve, both Preferred Networks and NVIDIA are vying for leadership positions in a rapidly changing market. With their respective strategies and innovations, these companies are shaping the future of AI technology and its applications in various sectors.
