Alibaba Backs $2.8 Billion Firm in Third Major AI Deal of 2024

(Bloomberg) — Alibaba Group Holding Ltd. has participated in new financing of 5 billion yuan ($691 million) for Chinese startup Baichuan, inking its third major AI deal this year as the e-commerce firm looks beyond its core business for growth.

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Baichuan is now valued at 20 billion yuan after securing funding recently from Beijing, Shanghai and Shenzhen governments, the startup said in a statement on Thursday. They were joined by existing investors include Tencent Holdings Ltd. and Xiaomi Corp.

Founded in April 2023, Baichuan is a leader in the generative AI space in China, one of the first batch of Chinese firms to win Beijing’s approval for public rollout. The Beijing-based startup has released 12 large language models so far and debuted an AI assistant in May, according to the statement.

Founder Wang Xiaochuan, who named his startup after the Chinese phrase for “a hundred rivers,” told Bloomberg News last year that China may need years to catch up with the US.

Baichuan’s Chinese peers MiniMax and Moonshot AI also saw their valuations swell past $2 billion earlier this year after receiving support from Alibaba.

Read: Billionaires and Bureaucrats Mobilize China for AI Race With US

The e-commerce operator joins Silicon Valley peers like Microsoft Corp. in placing big bets on generative AI, the technology that powers ChatGPT. The Baichuan deal signaled that Alibaba is accelerating its pace of investments which, in past years, cemented its technology and commercial leadership and helped propel the rise of names such as Didi Global Inc.

Alibaba’s new chiefs Joseph Tsai and Eddie Wu, two former deal-makers who took over the helm from Daniel Zhang in 2023, are exploring options to turn around a flagging company hammered by two years of regulatory scrutiny. Apart from investing in AI, the Hangzhou-based company is also orchestrating a multi-way split intended to spur independent business lines from cloud to logistics.

It’s trying to revive the cloud business and integrate AI and its in-house model — Tongyi Qianwen — across a sprawling business that also spans entertainment. Tsai has said the cloud unit already hosts half of China’s generative AI firms and serves about 80% of the country’s technology companies.

Alibaba’s growing bets in AI also align with Chinese President Xi Jinping’s repeated pledge to mobilize an entire nation to reduce its reliance on Western technology. AI, which has military as well as commercial applications, is of particular interest to both Beijing and Washington because of its potentially transformative nature.

–With assistance from Vlad Savov.

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