June 15 (Reuters) - Kunlun Tech is planning a $400 million capital boost for a subsidiary expected to buy a stake in an artificial intelligence firm via a share issue, as Chinese tech firms ramp up efforts to develop rivals to Microsoft-backed OpenAI's ChatGPT.

A global AI buzz kicked off by ChatGPT has spread to China, prompting a flurry of domestic companies including Alibaba and Huawei to announce similar projects and igniting venture funds and tech firms' interest in betting on startups that could be China's answer to OpenAI.

Kunlun Tech said late on Wednesday its holding subsidiary Star Group Interactive Inc has agreed to acquire the entire equity in Singularity AI Technology Limited, which is working with Kunlun on a large language model, via share issue.

Singularity AI's entire equity is priced at $160 million in this deal, and its current shareholder, Singularity AI Holdings Limited, will subscribe for a total of 206.7 million newly issued shares of Star Group, according to Kunlun Tech's filing.

After the acquisition, Star Group will receive another $400 million from its biggest shareholder, a wholly owned unit of Kunlun Tech, the filing showed.

A potential intensification of competitions with major tech companies, and the "policy risks" as Chinese regulators are expected to apply cyber security and data safety rules to the AI algorithms, are among the challenges facing Singularity AI, said Kunlun Tech.

Singularity AI reported a net loss of 23.7 million yuan ($3.32 million) in the first three months of 2023 and 10.9 million yuan in full year 2022, the filing showed.

Reuters reported earlier this month citing sources that Chinese startup MiniMax, also working on ChatGPT-like solutions, was near completing a fundraising of more than $250 million that would value it at about $1.2 billion including the new capital.

($1 = 7.1470 Chinese yuan renminbi) (Reporting by Roxanne Liu and Kane Wu; Editing by Toby Chopra)