Alibaba leads record deal to create $3.4 billion China AI firm

HONG KONG – Alibaba Group Holding led the largest single financing round for a Chinese artificial intelligence (AI) start-up, the latest in a string of sizeable investments that suggest the e-commerce firm is again deploying capital in the hunt for growth.

The e-commerce giant joins Tencent Holdings and Silicon Valley peers like Microsoft in placing big bets on generative AI, the technology that powers ChatGPT.

Alibaba led a US$1 billion funding round in Moonshot AI with existing backer Monolith Management, boosting the year-old firm’s valuation eight-fold to some US$2.5 billion (S$3.4 billion), people familiar with the deal said.

They joined previous backers including the investment arm of food delivery giant Meituan and Hongshan, formerly Sequoia China, the sources said.

Founded in March 2023, Moonshot AI is among the better-known start-ups developing generative AI in China, hoping to eventually match the likes of OpenAI and Google.

It rolled out its Kimi chatbot to the public last November and has since launched a platform for developers to build AI applications atop its model. Its valuation stood at just US$300 million when it secured initial funding in February 2023.

Moonshot AI declined to comment on the company’s fundraising details, which were first reported by Chinese media including 36kr on Feb 26. Monolith confirmed its participation in the latest round, without details. Alibaba representatives did not respond to requests for comment.

Alibaba’s new chiefs, chairman Joseph Tsai and chief executive Eddie Wu, have pledged to turn around a flagging company hammered by two years of regulatory scrutiny and an economic downturn.

It is driving new investment into game-changing technologies such as AI, while orchestrating a complicated multi-way split that will bring business lines from cloud to logistics to the fore. Mr Tsai has said the cloud unit now hosts half of China’s generative AI firms and serves about 80 per cent of the country’s technology companies.

But they are getting into a field that is getting crowded, as venture capital firms and tech leaders pour billions into training and developing AI services, mirroring a wave of activity across Silicon Valley and Europe. Other Chinese AI start-ups raising significant amounts from investors included Baichuan and Zhipu.

That is despite lingering concerns about United States sanctions, which bar Chinese firms from buying the most powerful Nvidia chips used to train and run AI models. Washington has targeted China’s AI efforts because the technology has geopolitical and military applications, complicating an already tense relationship.

Alibaba previously joined a US$300 million-plus round for Zhipu in 2023, alongside long-time rival Tencent. The company is trying to revive the cloud business and integrate AI and its in-house model Tongyi Qianwen across a sprawling business that also spans entertainment.

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