Alibaba Group Holding Ltd. is leading a financing round of at least $600 million for Chinese AI startup MiniMax, marking its second significant deal in the AI sector this year as part of its growth strategy.
MiniMax, a two-year-old firm, has attracted investments from Alibaba and other backers at a valuation exceeding $2.5 billion, sources familiar with the matter revealed. While the fundraising effort is ongoing, Alibaba and HongShan (formerly Sequoia China) have already committed to the financing. However, negotiations with additional investors are still underway, and deal terms may change accordingly.
Alibaba’s investment in MiniMax follows a trend seen among its Silicon Valley counterparts, such as Microsoft Corp., which are making substantial investments in generative AI technologies like ChatGPT. Alibaba recently led a $1 billion funding round for Moonshot AI, a startup focused on generative AI, also valuing it at around $2.5 billion. These consecutive deals underscore Alibaba’s strategy of betting on potential future leaders in the artificial intelligence sector, despite potential overlaps; MiniMax competes with Moonshot in developing ChatGPT-like services.
The renewed focus on investments from Alibaba comes as the company seeks avenues for growth under new leadership. Joseph Tsai and Eddie Wu, the new heads, are exploring strategies to revitalize the company, which has faced challenges due to regulatory scrutiny and economic headwinds over the past two years. Despite being a prolific tech investor in the past, Alibaba is now reinvigorating its investment efforts to propel its growth trajectory.
Under Xi Jinping’s administration, China has prioritized research in cutting-edge fields like AI, aiming to mobilize the nation to reduce reliance on Western technology. AI holds significance for both Beijing and Washington due to its potential military and commercial applications, promising transformative impacts.
Alibaba has surged ahead in deal-making in 2024 compared to rivals Tencent Holdings Ltd. and Baidu Inc., both of which have also invested in multiple AI startups following the global excitement sparked by ChatGPT.
Previously, Tencent had provided funding to startups like Zhipu and Baichuan, alongside Alibaba. Baidu, on the other hand, has focused more on developing its in-house Ernie platform, although it has also invested in fledgling firms.
In addition to its investments in AI and other technologies, Alibaba is orchestrating a strategic move to foster independent business lines spanning cloud services to logistics. The company aims to revitalize its cloud business by integrating AI, such as its in-house model Tongyi Qianwen, across various sectors including entertainment. Joseph Tsai has highlighted that Alibaba’s cloud unit already hosts half of China’s generative AI firms and serves approximately 80% of the country’s technology companies.