The AI services war is heating up: Meta ’s acquisition of Manus AI , one of the world’s most talked-about autonomous AI agent startups, for over $2 billion has been officially called off after Chinese government intervention. Behind Manus is Butterfly Effect, a Singapore-based startup with Chinese roots that has become a strategic asset in the world of agentic models. The SecNews editorial team examines what the cancellation means, who the company and its founders really are, and why the case is pivotal for the new era of AI competition between the US and China.
See also: OpenAI Astra: The most powerful AI model on hold because it discovers zero-day vulnerabilities
What is Manus AI and who created it?
Manus is an autonomous AI agent introduced in late 2024 by Butterfly Effect. Unlike traditional chatbots, the agent is not limited to answering questions — it interacts with its environment, experiments, learns from the results, and performs complex tasks such as creating websites, collecting data, or planning trips without further human guidance .
The trio of founders presents an impressive resume:
- Xiao Hong (Red): CEO and founder of Butterfly Effect, born in 1992 in China. He studied software engineering at Huazhong University of Science and Technology. Before Manus, he founded Nightingale Technology and then Butterfly Effect in 2022, where he created the browser extension Monica. He is one of the most recognized young AI entrepreneurs in the Chinese tech scene.
- Ji Yichao (Peak Ji): Chief Scientist and co-founder of Manus, born in 1992, raised between Colorado and Beijing. He began his career in technology at a very young age, creating the Mammoth Browser at the age of 17.
- Zhang Tao: Chief Product Officer, responsible for product development direction and strategy
How powerful is Manus really?
The numbers speak for themselves. Within a few months of public launch, Manus:
- Reached $37 million in monthly revenue by April 2025
- Exceeded $100 million in ARR in less than 8 months from launch, reaching a run-rate of $125 million
- Achieved state-of-the-art performance on the GAIA benchmark, surpassing OpenAI Deep Research
- Raised $85 million in total funding, with a $75 million Series B led by leading US VC Benchmark
- It was valued at $500 million in April 2025, with the new proposed financing raising it to $2 billion.
Benchmark’s Chetan Puttagunta has joined the board, while investors include heavyweights such as Tencent, ZhenFund, HSG (formerly Sequoia China) and Wang Huiwen, co-founder of Meituan. It is one of the few AI startups to have managed to attract both top-tier Chinese and US funds.
The timeline of the deal with Meta
- Mid-2025: Manus moves its headquarters from Beijing and Wuhan to Singapore, lays off most Chinese staff, and blocks access from mainland China
- December 2025: Meta announces acquisition intention, with the deal valued at between $2 billion and $3 billion
- January 2026: The Chinese Ministry of Commerce announces an “evaluation investigation” of the acquisition, to determine compliance with rules on export controls, technology transfer and foreign investment.
- March 2026: Co-founders Xiao Hong and Ji Yichao are reportedly placed under an exit ban, meaning they are prohibited from leaving China during the examination.
- April 27, 2026: China's National Development and Reform Commission officially blocks the acquisition, asking the parties involved to withdraw the transaction.
- June 15, 2026: Meta officially announces termination of relationship with Manus, citing Chinese regulatory decision
- August 11, 2026: Manus announces that it will continue its operations as an independent company
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Positives of Chinese intervention
- Protecting national AI infrastructure: Beijing has shown that it is unwilling to let cutting-edge technology, originally developed with Chinese talent and capital, pass into American hands without compensation or control. This stance is understandable in the geopolitical context.
- Strengthening Chinese ecosystem: With Manus remaining independent or being acquired by Tencent, a domestic champion in agentic AI is created, comparable to American players
- Stability for employees: The shutdown avoids the restructuring stress that usually accompanies large acquisitions, especially when they involve international deals with intense bureaucratic complexity
- Maintaining development paths: Manus can continue to develop its product without being integrated into a larger organization with different priorities, which has advantages for originality and speed
- Strengthening Singapore as an AI hub: Manus’s presence in Singapore enhances the industry’s geographical diversification, reducing concentration in Silicon Valley
Negative and open questions
- Investment on hold: Manus' US investors, led by Benchmark, miss planned exit and must recapitalize through a new deal with Chinese funds at a similar valuation
- Growth uncertainty: Manus loses access to Meta's vast infrastructure, data, and expertise, which would significantly accelerate global growth
- Geopolitics trap: Incident is a reminder that even “internationalized” companies headquartered in Singapore can fall under home country regulations, creating long-term uncertainty for investors
- Founder exit ban regime: The alleged travel bans against Xiao Hong and Ji Yichao during the review period raise questions about the personal freedom of entrepreneurs in similar cases
- Reduced international fundraising: The “Chinese roots, foreign headquarters” model of seeking funding may make it difficult for other Chinese startups considering similar paths.
The AI services war: the broader context
The Manus case is not an isolated one. It is part of a rapidly intensifying climate of international competition in artificial intelligence:
- Chinese models are closing the gap: Alibaba's Qwen3.8-Max, Moonshot AI's Kimi K3, and DeepSeek have managed to compare and in some cases surpass American flagship models, at a much lower cost
- Price war: Chinese companies offer API access at discounts reported as “99% below market prices,” creating a “death zone” for those without frontier technology or breakthrough pricing
- Regulatory backlash: Trump administration considers banning Chinese AI models in the US, while OpenAI and Anthropic push for regulations against open-weight competitors
- Technology leak: US researchers report that Chinese models are being trained on OpenAI and Anthropic outputs. At the same time, the US Commerce Department temporarily cut Anthropic's access to some models, a move that was reversed 18 days later
- Silicon Curtain: Both sides are now considering imposing a digital "wall" with control over who has access to which model and under what conditions
The cancellation of the Meta-Manus deal is therefore a tangible moment in what can justifiably be called the AI services war: a conflict where deals, funding, talent and models now depend not only on technological or business parameters, but also on geopolitical decisions.
Impact on the Greek market
- Access to agentic AI: Manus remains available via subscription from its website and app. Greek businesses considering agentic solutions for workflow automation have one more option
- Supplier diversification: Regulatory tensions between the US and China reinforce the need for Greek organizations not to rely on a single AI provider to reduce the risk of sudden disruption
- European autonomy: The incident strengthens the arguments for European autonomy in AI, with initiatives such as EuroLLM and national funding schemes taking on added importance
- Compliance complexity: Greek companies under DORA and NIS2 must consider the possibility of sudden changes in the availability of AI providers due to geopolitical tensions
Also useful: Meta Muse Spark: AI model hacked company in tests
What comes next?
The next big question is how Manus will be recapitalized. According to reports in July 2026, Tencent is leading discussions to become the largest shareholder in a new $2 billion financing deal, which will also include existing Chinese investors HSG and ZhenFund. US investors such as Benchmark are expected to exit.
At the same time, the market is waiting to see whether Manus will maintain the same growth momentum without Meta's support, and whether the new Chinese share structure will allow it to grow outside of China or limit it to the Asian market. The SecNews editorial team will monitor the development of the new transaction, the financial results of Manus as an independent company and any new geopolitical tensions that will affect the map of global AI. Sources: Reuters, Bloomberg, The Guardian, Wikipedia, Manus.
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