The Wall Street Journal reported that Chinese tech giants Alibaba and Tencent have stepped up their investments in artificial intelligence (AI) startups since 2023. These giants, known for their aggressive approach in the past, are now directing their efforts toward developing large language models (LLMs) and related technologies to maintain their relevance in an ever-evolving technology market.
Data compiled by market research firm ITJuzi shows that approximately 40% of Alibaba's and 30% of Tencent's investments in China over the past two years have been focused on AI startups. This strategic shift is partly due to the slowdown in the Chinese economy and regulatory restrictions imposed by Beijing, which has led both companies to prioritize areas with high growth potential.
Among the main startups backed by these tech giants are China's so-called "six little dragons of artificial intelligence," startups valued at more than $1 billion each. These investments seek to boost domestic technological development and gain privileged access to the latest innovations in AI, a strategic move to strengthen their influence in the global market.
The growing interest in AI is also reflected in Alibaba's and Tencent's efforts to develop their generative AI models and offer these services through their cloud platforms. This approach allows them to capture a larger market share and increase their revenues by selling the computational infrastructure needed to train these models. This strategy has already shown positive results on their balance sheets.
Technology companies want to be included in an increasingly competitive environment where more than 190 AI model products are available in China. Investing in these startups gives them a competitive advantage by accessing cutting-edge technology and establishing themselves as leaders in a rapidly developing field.
The importance of these investments is amplified by restrictions imposed by the United States on access to advanced semiconductors, an essential component for AI development. Chinese companies, in response, are offering computational power rather than cash to startups, which is more valuable in the current context.
In short, Alibaba and Tencent have taken a strategic approach to AI, using their vast resources to support startups while ensuring that their operations benefit from the rise of artificial intelligence. This move not only strengthens their position in the market but also reflects a shift in investment priorities in the Chinese technology sector. According to sources close to these investments, AI startups now find it easier to access capital, in contrast to previous years, when larger companies used to impose tighter restrictions.
Chinese tech giants' shift in approach to AI underscores the importance of remaining competitive in a global market that is rushing toward adopting emerging technologies.
