United States has placed Tencent-backed startup Zhipu on its trade-restrictions blacklist, targeting one of the emerging companies considered a strong contender in the race to develop a competitor to OpenAI’s ChatGPT.

On Wednesday, the US Department of Commerce added the startup to its entity list, restricting US suppliers from selling to the company without a license.

This action, a last-minute measure from the outgoing Biden administration, comes alongside new regulations designed to prevent advanced chips, including AI accelerators, from reaching China.

Zhipu, backed by Tencent and Alibaba Group Holding Ltd., is among a handful of promising AI startups in China that have secured substantial funding and achieved high valuations.

Emerging from research at Tsinghua University, the company is working on large language models similar to those developed by OpenAI. In 2024, Zhipu was valued at nearly $3 billion.

Zhipu said the US “lacked factual basis” for the decision. “Being included in the Entity List will not have a substantial impact on the company’s business,” Zhipu wrote on WeChat on Wednesday.

Previous export restrictions on advanced AI chips, such as those from Nvidia Corp., have already limited Zhipu’s access to cutting-edge AI development hardware in China.

Despite this, the company, which raised approximately $410 million in its latest funding round in December, claims to have tens of millions of users in the country.

Zhipu is one of many Chinese companies recently added to various US government blacklists.

Just a week earlier, Tencent was placed on a Defense Department list of companies linked to the Chinese military, alongside Tesla Inc. battery maker Contemporary Amperex Technology Co. Ltd.