Alibaba Backs China's AI Startups with Cloud Credits

Alibaba offers cloud computing resources to support China's AI startups, investing in companies like Moonshot and Zhipu. The company aims to establish itself as a leader in the competitive AI sector, mirroring strategies of Microsoft and Amazon.

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Aqsa Younas Rana
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Alibaba Backs China's AI Startups with Cloud Credits

Alibaba Backs China's AI Startups with Cloud Credits

Alibaba Group Holding Limited is throwing its weight behind China's burgeoning generative AI industry, offering cloud computing resources to support the country's AI startups. Instead of traditional cash-for-equity investments, the tech giant is providing credits that can be used on its cloud platform, aiming to establish itself as a leader in the competitive AI sector.

Why this matters: Alibaba's move to support China's AI startups could have significant implications for the global AI landscape, potentially shifting the balance of power in the industry. As AI technology continues to advance, the companies and countries that lead the way in its development will have a major advantage in terms of innovation, economic growth, and national security.

In the last three months alone, four generative AI startups in China have raised money at valuations exceeding $1 billion, as over 260 companies vie to emulate the success of U.S. rivals like OpenAI and Anthropic. China is now home to 369 unicorns with an average value of $3 billion, led by AI and semiconductor firms.

Alibaba has invested in several prominent AI startups, including Moonshot, Zhipu, MiniMax, and 01.ai, which are developing local versions of popular applications like ChatGPT. The company's cloud arm is seeking new revenue streams by offering its computing resources to train AI models, mirroring the strategies of Microsoft and Amazon.

Unlike its U.S. counterparts, Alibaba retains the funds in an escrow account, treating them as incoming revenue. The company is also committed to monetizing its inventory of AI chips, which includes significant orders of Nvidia Corp GPUs stored in data centers across China and Southeast Asia.

Alibaba recently launched the latest version of its large language model, Qwen2.5, claiming it surpasses OpenAI's GPT-4 in language skills. The move comes as Alibaba's chief, Joe Tsai, previously flagged China's lag in the AI race due to the U.S. tech embargo. Despite losing over 9% in the last 12 months, Alibaba's stock traded 3.50% higher at $82.84 in premarket trading on Monday.

China has emerged as a powerhouse in AI development, with substantial investments in research and development. SenseTime, a world-renowned AI company valued at $7.5 billion, boasts partnerships with Alibaba, Qualcomm, and Honda. iFlytek, a leader in voice recognition and natural language processing, collaborates with Tencent, Baidu, and Alibaba. Megvii, a facial recognition technology company with a market cap exceeding $4 billion, partners with Alibaba and Intel.

Alibaba's strategic move to support China's generative AI startups through cloud credits underscores the company's ambition to establish itself as a frontrunner in the AI race. As the global AI landscape continues to evolve rapidly, Alibaba's investments and partnerships position it to capitalize on the immense potential of this transformative technology.

Key Takeaways

  • Alibaba supports China's AI startups with cloud credits, not cash investments.
  • China is home to 369 unicorns, with AI and semiconductor firms leading the way.
  • Alibaba's cloud arm offers computing resources to train AI models, mirroring Microsoft and Amazon.
  • Alibaba launched Qwen2.5, a large language model claiming to surpass OpenAI's GPT-4.
  • China emerges as an AI powerhouse, with Alibaba, SenseTime, iFlytek, and Megvii leading the charge.