BEIJING – After shaping the early stages of China’s e-commerce and followed by years of management failure, Alibaba has placed a big bet on artificial intelligence that comes with a new era. This month, Alibaba led a round of approximately $100 million investments at humanoid startup X Square Robot, putting $60 million in the startup behind the AI Video Generation App Pixverse. Tech Giant has also announced a strategic AI partnership with smartphone company Honor. According to a CNBC analysis from Pitchbook Data, it has participated in more than $3.3 billion in transactions ranging from AI Model Startups Moonshot and Minimax to Robotics Startup Limx Dynamics, just as Openai launched ChatGpt for consumers. The Hangzhou-based company is also making significant investments within the company. In February, it announced plans to spend 380 billion yuan ($53.42 billion) on AI and cloud infrastructure over the next three years. Wei Sun, principal analyst at Counterpoint Research, said 100 billion yuan has already been involved in AI infrastructure and research over the past year. “Alibaba has established itself as China’s most offensive AI investor,” said Sun. “This level of spending is unprecedented among private Chinese companies, competing for the trajectory of US technology Titan.” Matthew Peterson, managing partner at Peterson Capital Management, said that Alibaba was able to reach a market capitalization of $1 trillion over five years, and a market capitalization of $1 trillion over five years. Investors cheered. The company’s US trading stock has skyrocketed over 90% since the start of the year. The latest profit came after Alibaba secured major Chinese telecom customers for AI chips via cloud computing units. “Alibaba’s investment in AI is a massive commitment that is already bringing concrete returns,” Sun adds, referring to recent financial statements and stock earnings. In the latest quarter, Alibaba’s cloud computing services increased revenues from 26% to 33.4 billion yuan with increased demand for the implementation of the AI model. After Alibaba abolished its plans to list cloud units in November 2023, this is a comeback, citing uncertainty about US export controls regarding AI chips to China, and making several cloud-related management changes. “It’s a sea change,” said Duncan Clark, Alibaba’s early advisor and now chairman of the Beijing-based investment advisor BDA. “Their key competitiveness is that they have a massive amount of data and a cloud side of things,” he said. “The combination of these things puts them in a very powerful position to reinvent their business using AI.” Baba Ytd Mountain Alibaba shares are in tears. Alibaba has also launched its own AI models and tools for generating text and videos, which are ranked in the top 10 faces of open source platforms. Alibaba also plans to take on the meta with AI-powered glasses. “Tips, AI, cloud, they’re not really the price,” Peterson of Peterson Capital said. One of his funds has nearly $40 million in assets under management and started investing in Alibaba’s US traded stock three years ago. This now accounts for nearly 20% of the portfolio. Expenditures are “absolutely reasonable… It’s a very expensive sector where they work, but they have to be one of the top players,” Peterson said. Pivot To Tech The Shift shows pivots from the roots of online shopping companies that have lost ground to rivals like Pinduoduo and Douyin, particularly in their e-commerce live streams. This year, rivals JD.com and Meituan joined the fight for grants for on-demand delivery. Earlier this month, Alibaba announced that the “AMAP” navigation app will launch rankings for local companies and will take on the popular directory of Meituan restaurants, shops and tourism sites. But e-commerce is just the icing on the cake. Alibaba is far more busy with AI, data, fintech and the cloud. “E-commerce talk is just giving them cash flow, so we can pursue all these opportunities in the high-tech space,” Peterson said. Counterpoint’s Sun noted in an email that its strategy to integrate AI models, robots and chips would “place Alibaba as a unique hybrid of Google (AI & Chips) + Amazon (Services & E-Commerce). The company “arguably is China’s most powerful private sector competitor,” she said. There is also a political consideration that has hit Alibaba’s raw nerves since becoming a child of the Chinese crackdown on internet technology companies and was fined $2.8 billion in 2021 for alleged exclusive action. In contrast to the company’s roots as a distributor, “Alibaba is a much more core technology company than it used to be,” Clark said. “It is reflected in the management capabilities, management capabilities in that field, not sales.” “It’s exactly where you need to be with the government in your current attitude with the US,” Clark said. “There’s a sense that it’s going to be a national player.” – CNBC’s Victoria Yo contributed to this report.
