Chinese tech giants Alibaba and Tencent are making a strategic move by significantly increasing their investments in artificial intelligence (AI) startups, despite a general slowdown in their overall investments. This bold decision underscores their unwavering commitment to AI as a key driver of future growth.
Since the beginning of 2023, Alibaba and Tencent have directed a record-breaking 40% and 30% of their deals in China, respectively, towards AI startups. This shift in focus comes at a time when both companies have been scaling back their investments due to regulatory challenges, the impact of the COVID-19 pandemic, and a slowing Chinese economy. However, both companies have identified AI as a strategic priority, recognizing its potential to strengthen their market influence and maintain their technological edge.
Their renewed focus on AI is driven by a desire to drive profits and expand their cloud services, which offer access to AI computing power and foundational AI models developed in-house. This strategic investment in AI startups allows them to tap into cutting-edge technologies and talent, accelerating their own AI development.
Analysts believe this investment is a strategic move to bolster their technological edge and expand their market influence. As Charlie Dai, an analyst at Forrester, puts it, “Generative AI holds massive business potential, and no tech giant would want to miss the opportunity.” He emphasizes that investing in leading AI startups, even those already backed by competitors, allows tech giants to grasp opportunities as they emerge.
Alibaba and Tencent have been instrumental in the growth of six Chinese AI startups, each valued at over $1 billion, known collectively as China’s “Little Artificial-Intelligence Dragons.” These startups have received significant funding from both companies, highlighting the importance of their role in fostering innovation in the Chinese AI ecosystem.
This increased investment in AI startups by Alibaba and Tencent is a significant development in the global AI landscape. Asian startups are increasingly challenging the dominance of NVIDIA Corp in the AI chip market, developing more energy-efficient and cost-effective chips for specific AI applications. This trend highlights the growing importance of AI infrastructure, including semiconductors and systems, in the tech industry.
Alibaba has been particularly aggressive in its investment in generative AI, claiming that its new AI models outperform Meta Platforms Inc.’s Llama 3 in specific tasks. The company is also set to launch an AI-powered conversational sourcing engine in September to enhance the buying and selling of goods online.
The acquisition of UK-based chipmaker Graphcore by SoftBank Group further underscores the growing importance of AI infrastructure. This acquisition highlights the increasing demand for advanced semiconductors and systems to support the rapid development and deployment of AI solutions.
The strategic shift by Alibaba and Tencent toward AI startups reflects the growing importance of AI in driving business growth and shaping the future of technology. Their investments are expected to fuel further innovation in the AI landscape, fostering competition and accelerating the development of groundbreaking AI solutions.
