ZAI shares slide amid row over user data uploads

Shares of Chinese AI company ZAI Co Ltd (HK:2513) plummeted on Monday after it was accused of uploading user data to remote servers without consent. According to the South China Morning Post, ZCode assistant tool, developed by the company, was allegedly uploading workspace data from users to external servers without their explicit approval.

Despite the company issuing an apology and patching the breach, developers expressed concern that the incident would significantly damage the company's reputation. ZAI shares plummeted as much as 5% to HK$733.50. Rival company MiniMax Group Inc (HK:0100) also experienced a similar decline, trailing a 0.7% rise in the Hang Seng index.

The data breach is particularly concerning as it occurs at a time when discussions about AI security and the potential for rogue frontier models are on the rise. Several prominent U.S. AI executives have called for a temporary pause in AI development due to the risks it poses. The U.S. and China are set to address the issue in a crucial summit in Washington this week.

U.S. Treasury Secretary Scott Bessent suggested an AI safety notification system between the two nations during a recent interview. ZAI is considered one of China's leading frontier AI labs, a designation that propelled the company to a record-breaking stock market debut earlier in the year. The shares have surged 466% this year, but they remain far below their all-time high, which saw ZAI's value jump over a thousandfold.