Alibaba backs US$2.5 billion AI startup in second major 2024 deal

Alibaba Group Holding is leading a financing round of at least US$600 million for Chinese AI startup MiniMax, spearheading its second major deal in the space this year as it deploys capital in pursuit of growth.

The two-year-old firm has secured funds from Alibaba and other investors at a valuation of more than $2.5 billion, according to people familiar with the matter. The fundraise remains in progress but Alibaba and HongShan, formerly Sequoia China, have committed to the financing, one of the people said, asking not to be identified talking about a private deal. Deal terms could still change because negotiations with more investors are ongoing, the people added.

Alibaba joins Silicon Valley peers like Microsoft in placing big bets on generative AI, the technology that powers ChatGPT. It led a US$1 billion funding round in recent months in Moonshot AI, boosting the year-old startup’s valuation also to about US$2.5 billion, Bloomberg News reported.

The successive deals show how Alibaba’s keen to place bets on potential future leaders in artificial intelligence, even if they don’t necessarily dovetail: MiniMax, founded by veterans of computer-vision specialist SenseTime Group, competes with Moonshot in developing ChatGPT-like services.

Alibaba – once among China’s most prolific tech investors until a government clampdown began in 2020 – is once again on the hunt for growth. New chiefs Joseph Tsai and Eddie Wu are exploring options to turn around a flagging company hammered by two years of regulatory scrutiny and an economic downturn. 

Representatives for Alibaba, Minimax and HongShan didn’t have immediate comment when contacted by Bloomberg News.

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Xi Jinping’s administration has designated research into cutting-edge fields like AI a priority for coming years, vowing to mobilise an entire nation to try and reduce a reliance on Western technology. AI, which has military as well as commercial applications, is of particular interest to both Beijing and Washington because of its potentially transformative nature.

Alibaba appears to have gotten off to a quicker start on deal-making in 2024 than rivals Tencent Holdings and Baidu, which have also funnelled capital into multiple AI startups since ChatGPT ignited a global frenzy.

Tencent previously provided funding to startups including Zhipu and Baichuan together with Alibaba. Baidu, which in 2023 said its chatbot matched GPT in some respects, has also financed fledgling firms but largely focused on developing its in-house Ernie platform.

Apart from investing in technologies such as AI, Alibaba is also orchestrating a multi-way split intended to spur independent business lines from cloud to logistics.

It’s trying to revive the cloud business and integrate AI and its in-house model – Tongyi Qianwen – across a sprawling business that also spans entertainment. Tsai has said the cloud unit already hosts half of China’s generative AI firms and serves about 80 per cent of the country’s technology companies. BLOOMBERG