Alibaba Backs China's AI Startups with Cloud Credits, Eyeing Leadership in Global AI Race
Alibaba Group Holding Limited (NYSE:BABA) uses its cloud computing resources to support China’s generative AI start-ups, providing them with credits instead of traditional cash-for-equity investments.
The strategy aims to establish the e-commerce giant as a leader in the AI sector, similar to Microsoft Corp’s (NASDAQ:MSFT) approach with OpenAI, the Financial Times reports.
The company has invested in several prominent start-ups, such as Moonshot, Zhipu, MiniMax, and 01.ai, developing local versions of popular U.S. applications like ChatGPT.
Also Read: Alibaba’s To Overhaul Taobao In Strategic Move to Reclaim E-commerce Dominance
Despite sluggish growth since Beijing’s crackdown on large internet firms, Alibaba’s cloud arm is seeking new revenue by offering its computing resources to train AI models.
This investment strategy mirrors those of Microsoft and Amazon.Com Inc (NASDAQ:AMZN), where funds are used to support operations on specific cloud servers.
However, unlike these U.S. companies, Alibaba retains the funds in an escrow account, treating them as incoming revenue. This computing-for-equity approach is precious in China, where cloud resources are scarce due to U.S. export restrictions on advanced chips.
Alibaba’s commitment to AI extends to monetizing its inventory of AI chips, which includes significant orders of Nvidia Corp (NASDAQ:NVDA) GPUs stored in data centers across China and Southeast Asia. Earlier Alibaba chief Joe Tsai had flagged how China lagged behind in AI race due to US tech embargo.
Last week, Alibaba launched the latest version of its large language model, Qwen2.5, which it claimed to beat OpenAI’s GPT-4 in language skills.
Alibaba stock lost over 9% in the last 12 months. Investors can gain exposure to the stock via Invesco Golden Dragon China ETF (NASDAQ:PGJ) and Tidal Trust II CoreValues Alpha Greater China Growth ETF (NYSE:CGRO).
Price Action: BABA shares are trading higher by 3.50% at $82.84 premarket at the last check on Monday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo by Fooksou Lamimo via Wikimedia Commons
