Alibaba (BABA) stock soared to its highest level in almost four years after the e-commerce and cloud giant said it will boost AI spending beyond its original commitment of more than $50 billion, joining the ranks of US big tech players’s escalating bets on artificial intelligence.
US-listed American Depository Shares (ADRs) jumped 9% after CEO Eddie Wu said during a conference in China that a worldwide investment in artificial intelligence is estimated to reach $4 trillion over the next five years, and Alibaba must keep pace.
Wu said the company will expand on its February plan to devote over $53 billion toward building AI models and infrastructure over three years, though he did not specify how much higher the investment would go.
Alibaba also announced a software deal with Nvidia (NVDA) to integrate the chip giant’s AI development tools used for training for robotics and self-driving cars. The financials of the deal were not released.
The agreement however marks a collaboration between the two companies at a time when US-Beijing trade relations remain fragile.
Alibaba and other Chinese tech companies have been working on developing AI chips to fill the void left by regulatory challenges concerning Nvidia’s role in China as Beijing has made moves to wean its reliance off US chips.
During his talk at the conference in Hangzhou, China, Wu underscored the company’s cloud ambition to establish itself as a top “full-stack” artificial intelligence provider, which includes its AI chip technology.
Alibaba’s cloud unit, which services clients abroad including the US and Australia, will expand data center openings into Brazil, France and the Netherlands.
Alibaba’s lean into AI comes as Amazon (AMZN), Alphabet (GOOGL, GOOG), Microsoft (MSFT), and Meta (META) are set to invest a cumulative $364 billion in the technology in their respective 2025 fiscal years, up from their prior estimates of around $325 billion.
While Alibaba is often compared to Amazon for its outsized e-commerce business, its cloud computing business has been rapidly growing, helping send the stock up more than 112% year-to-date.
Cloud revenue grew 26% year-over-year during its April to June quarter, with Wu has saying “AI + cloud” are Alibaba’s engines of growth alongside e-commerce.
Ark Invest’s Cathie Wood bought more than $16 billion in Alibaba stock for the first time since 2021 on Monday with about half going into the Ark Fintech Innovation ETF (ARK-F) and the other half into ARK Next Generation Internet ETF (.ARK-W).
