China has caught up with the United States in AI field, leading most of the global AI-related research activities and investment over the past few years.

National and local government are enacting policies, creating a suitable environment for AI; industries are adopting AI to improve efficiency; and startups are competing for growth, commercialization and exit opportunities. At the same time, a 'capital winter' is coming to Chinese tech startups. With venture capital and private equity investment activities cooling down, investors are acting more cautiously and critically than ever.

Chinese Internet giants are making clear their ambitions in this hot area. Although they are not making impressive enough performance in terms of AI talents, papers and patents compared with U.S. counterparts according to "China AI development report", these companies are spending larvishly in AI startups.

Among all investors interested in AI area, tech behemoths are proven to be very active ones. Not only do they make bold investments in R&D, but also take chances in acquiring shares of AI start-ups. At the same time, their AI strategies are often announced by using ambiguous new terms.

With all the overwhelming 'intelligent' concepts, to check where the money spent helps to ferret out real focuses of the titans. 

Alibaba's AI Investment 

"Internet giants like Alibaba, Tencent and Baidu, obtaining great business achievements partly benefited from the demographic dividend, stare on any of new business opportunities like AI," says Hugo Shong, partner of IDG Capital. 

As the world's largest E-commerce company, Alibaba has the advantage of possessing an enormous amount of online data and a significant wealth to make investments.

We organized all the AI companies reportedly invested by Alibaba in the chart below. 

AI empowers core business

Alibaba's early AI adoptions were to enhance operation efficiency to a great extent.

It started AI investment activities since 2013 by a deal with Xiao-i (小i机器人), a chatbot company. From audio technology, Alibaba then expanded the technology target into areas such as data management and knowledge graph in 2014. 

Just as low-tech companies embracing new technology, it takes time for companies to see the capability of AI. With the help of chatbot (Xiao-i 小i机器人) and knowledge graph technology (HUNDSUN 恒生电子), Alibaba could save a significant amount of manpower for customer services in E-commerce business line. Zhongan Insurance (众安保险) is the first online insurance company rolling out services like trip delay insurance and return shipping insurance. These services perfectly matched Alibaba's online retail platforms, travel services, etc. 

Starting the business as a provider of consumer-to-consumer (C2C), business-to-consumer (B2C), and business-to-business(B2B), Alibaba dominates Chinese retail industry unquestionably. The term "New Retail" was coined in October 2016 by Jack Ma, co-founder of Alibaba and executive chairman of Alibaba. From his perspective, New Retail is a tech-enabled retail revolution to integrate and upgrade the retail industry from online channels, offline channels, logistics to services.

Alibaba's AI investments definitely boost the development of its new retail convenient store – Hema Fresh, by employing facial recognition payment, digitalized inventories, machine learning-enabled supply chain, etc.

As a retailer, Alibaba definitely understood the importance of traffic entrance. It was an age of AI enlightenment when Smart virtual assistants such as Apple's Siri (Oct. 2012), Amazon's Alexa (Nov. 2014), and Google Assistant (May. 2016) came into life. Alibaba, comparable to Amazon, would never miss the buzz. Tmall Genie, intelligent speaker born in Alibaba AI Labs, officially debuted in 2017 with the help of several investments in audio, data and robotics tech companis. 

AI builds a new career

Alibaba's AI strategy is not early but not too late. A significant difficulties for an company to use AI is neither algorithm nor data, but computing power. Alibaba realized the demand just in time. 

A crucial investment laid a foundation for Alibaba's future AI development in 2015. In the second half year of 2015, Alibaba made CNY 6 billion strategic investment in its subsidiary Alibaba Cloud, for the development of cloud computing, data infrastructure and cutting edge technology.

Since then, Alibaba Cloud has become a playground for AI, providing significant computing power. It no longer functions solely as internal business infrastructure but serves as online services in the shape of IaaS.

Alibaba's later AI moves could never be separated from the cloud. Alibaba invested in C-SKY(中天微), chip company focuses on Integrated circuit (IC) design as early as 2016. In 2018, Alibaba acquired C-SKY and invested in another IC design company, Cambricon (寒武纪). 

From the cloud continuously falls application ideas and scenarios. AI products on Alibaba Cloud include two categories: the ET Brain platform and industry solutions. ET Brain is an AI platform used in solving business problems and social problems, currently including City Brain, Industrial Brain, Medical Brain, Environment Brain, and to-be-released Aviation Brain and Financial Brain. 

ET Brain focuses on data-intensive areas closely associated with daily life. Especially, City Brain, first employed by the government of Hangzhou, Alibaba's headquarter in Oct 2016, has become a namecard of Alibaba's AI capability.

These functions highly depend on interactive audio, computer vision and natural language processing technologies.  It explains why Alibaba repeatedly approaches AI startups excelling in computer vision, data intelligence and smart audio technologies. 

In 2017, Alibaba made a CNY 1500 million (USD 200 million) strategic investment in SenseTime, the most valuable AI unicorn worldwide, specializing in facial recognition. The AI startup’s 2018 series C round of financing of USD 600 million also led by Alibaba. 

The same year, Alibaba also invested in China TransInfo(千方科技), an AI provider of intelligent transportation systems and solutions. It, similar to Sensetime, attracts Alibaba for more than one round of financing. Alibaba Group acquired 15% equity of China TransInfo, becoming the second largest shareholder in May 2019. 

Together with series investments made in XPeng Motors, Alibaba Cloud was able to launch ET City Brains in more than ten cities in just two years. 

So far, Alibaba Cloud has achieved revenue of CNY 24.7 billion in 2019, multiplying 20 times in four years. It has been the largest cloud service provider in Asia Pacific for two consecutive years and among the top five cloud provider with AWS, Microsoft Azure, Google Cloud, IBM and Oracle. Cloud service has become a real strategic business unit (SBU) to Alibaba.

Summary 

In conclusion, Alibaba's AI investment decision is driven by technology, starting with the intention to improve operation efficiency and upgrade entrenched businesses. Later investments were made to assist AI R&D and provide AI enabled products and solutions based on the cloud platform.

Among all 32 deals made in AI, 27 of them are Chinese startups: 8 in Beijing, 7 in Hangzhou, Alibaba headquarter city, 6 in Shanghai, 3 in Guangzhou, 2 in Nanjing and 1 in Suzhou, most of them concentrating in Southern China close to Alibaba's headquarter. 

For international AI investments, Alibaba does not prone to those in U.S. but invests more in Israel. Three companies invested were in Israel, one in France, and one in the U.S. 

Moving forward, IoT is Alibaba's new track, where a large amount of data would be generated and instant analytics required. From smart home to smart city, there were millions of chances. We would also expect further investments in chips and hardware as unprecedentedly strong computing power is wanted when data explode in 5G era. Besides, the latest investment in education might indicate a march in AI + Education, a long-term track in Chinese market. As the layout of Aviation ET Brain, AI companies in aerospace could be funded by Alibaba as well.