Alibaba leads record $2.5 billion investment to create Chinese artificial intelligence company

(Bloomberg) -- Alibaba Group Holding Ltd led the largest single funding round for a Chinese artificial intelligence startup, the latest in a series of large investments that signal the e-commerce company is once again deploying capital to pursue increase.

Alibaba joins Silicon Valley peers such as Tencent Holdings Ltd. and Microsoft Corp. in making a big bet on generative artificial intelligence, the technology that powers ChatGPT. The company co-led a $1 billion funding round for Moonshot AI with existing backer Monolith Management, boosting the one-year-old company's valuation eightfold to about $2.5 billion, people familiar with the matter said. They join previous backers including the investment arm of food delivery giant Meituan and Sequoia Capital (formerly Sequoia China), people familiar with the matter said. said the people, who asked not to be named discussing the private deal.

Founded in March 2023, Moonshot AI is one of China's high-profile startups developing generative artificial intelligence, hoping to eventually rival the likes of OpenAI and Google. The company launched its Kimi chatbot to the public last November and has since launched a platform for developers to build AI applications on its models. When it received its initial financing, it was valued at just $300 million.

Moonshot AI declined to comment on the company’s financing details, which were first reported by local media including 36Kr. Monolith confirmed its participation in the latest round of funding, but did not disclose details. An Alibaba representative did not respond to a request for comment.

Read more: Billionaires and bureaucrats mobilize China in AI race with US

Alibaba's new CEOs, Joe Tsai and John Woo, have pledged to turn around a company that has been reeling from two years of regulatory scrutiny and a sluggish economy. It is driving new investments in game-changing technologies such as artificial intelligence while orchestrating complex multi-directional carve-outs that will differentiate business lines from cloud to logistics. Cai said the cloud unit now owns half of China's generative AI companies and serves about 80% of the country's technology companies.

But they are entering an increasingly crowded field as venture capital firms and technology leaders pour billions of dollars into training and developing artificial intelligence services, mirroring a wave of activity in Silicon Valley and Europe. Other Chinese AI startups that have raised significant funding from investors include Baichuan and Zhipu.

This comes despite lingering concerns about U.S. sanctions, which ban Chinese companies from purchasing the most powerful Nvidia chips used to train and run artificial intelligence models. Washington is targeting China's artificial intelligence efforts because the technology has geopolitical and military applications, complicating an already tense relationship.

Alibaba previously participated in more than $300 million in Zhipu financing in 2023, along with long-time rival Tencent. The company is trying to reinvigorate its cloud business and integrate artificial intelligence and its internal model "Unified Qianwen" into a vast business covering the entertainment field.

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