Alibaba bets big on AI
Alibaba is all in on AI.
On Monday, the owner of China’s largest hyperscaler said it will spend more than RMB 380 billion (or USD 54 billion) in AI infrastructure from 2025-2027.
Some context: This move was telegraphed during Alibaba’s Q4 earnings call last week, when executives stated that the company's next three years’ capex would exceed its total spending over the past decade, which sits at roughly RMB 376 billion.
Why now? DeepSeek’s model releases have completely flipped the AI narrative in China.
- Investors have flip-flopped from “China is uninvestable” to “China is in the AI race with the US” in just a matter of days.
The motivation behind the dramatic capex increase is pretty straightforward:
- DeepSeek made everyone believe inference cost will continue to drop like a rock – which will drive higher return on investments for the hyperscalers who host those models.
Plus: Ali’s commitment will provide all upstream suppliers – chip designer, fabs, and toolmakers – with more confidence to invest more to meet the upcoming infrastructure demand.
The big question: How much of this capex will be spent on Nvidia chips versus domestic alternatives?
- China’s AI supply chain only benefits if Alibaba prioritizes homegrown chips.
That brings up a bigger question: Will Beijing nudge Alibaba to buy more domestic chips?
- Maybe – but Alibaba may not need a push from the state.
- The company has a real incentive to localize for the long term with geopolitical instability impacting chip availability.