(Yicai Global) July 20 -- Shares in SenseTime Group surged as much as 15.2 percent today after the Chinese artificial intelligence giant repurchased HKD14 million (USD1.8 million) worth of its own shares to shore up the languishing stock price which has lost nearly 40 percent in value since the firm went public last December.

SenseTime’s share price [HKG:0020] was trading up 11.4 percent at HKD2.34 (USD0.30) as of 1:40 p.m. China time, giving it a market capitalization of HKD78.4 billion (USD10 billion). Earlier in the day it had hit HKD2.42, still 37 percent below its issue price of HKD3.85.

SenseTime bought back 6.7 million shares yesterday after the stock price slumped to a new low that day of HKD2.10. The firm’s market capitalization has sunk by almost HKD250 billion (USD31.8 billion) since it reached a peak of HKD325 billion in January.

On June 30, the lock-up period for almost 70 percent of the Hong Kong-based company’s restricted shares expired. The share price plunged 47 percent to HKD3.10 apiece, and the trading volume surged 30-fold from the previous trading day to HKD6.1 million (USD800,000).

To boost investor confidence and safeguard their interests, SenseTime announced the same day that senior management had agreed to a voluntary extension of the lock-up period to demonstrate their faith in the long-term value of the company.

Looking at the size of the sell-off that day, it can be inferred that some cornerstone investors have sold their stock, a tech investor told Yicai Global. And this is an indication that the AI sector is rapidly losing its appeal.

In previous years, investors were optimistic about the prospects of the AI industry and eager to pump funds into loss-making firms, which greatly pushed up their valuation. However, the difficulties in implementing AI tech, the uncertain application scenarios and their inability to make money have led to huge losses that are getting worse and worse.

“Investors can accept losses, and Shanghai’s Star Market allows unprofitable companies to list, but long-term high losses shake investor confidence,” the investor said.

SenseTime still dominates the face recognition market in China with 22.2 percent market share in the second half of 2021, up from 18.4 percent the year before, according to International Data Corporation.

But due to high spending on research and development, SenseTime has never made a profit. Last year, it racked up losses of CNY1.4 billion (USD207.3 million) on revenue of CNY4.7 billion (USD696 million). And the year before that it logged losses of CNY12.1 billion (USD1.8 billion) on revenue of CNY3.4 billion.

Before going public, SenseTime raised USD5.2 billion in 12 funding rounds. Early investors such as e-commerce giant Alibaba Group Holding and venture capital firm IDG Capital all bought in at under HKD2.50 per share, less than the listing price.

Editor: Kim Taylor